Risk to London house price boom

Interest rates rising sooner than expected, the removal of easy money and easing fears over global risk could result in London house prices "unravelling", say Deutsche Bank.

The biggest risk to the London housing price boom could be a toxic mix of a strengthening pound that would scare off overseas buyers, an easing of global economic risk and removal of easy money.

Property prices in the nation’s capital have rapidly outpaced the rest of the country. From lows in 2009 house prices in London have soared by almost 50pc since the economic crisis, and are now 20pc above their pre-crisis peak, according to Deutsche Bank research.

London house prices rose by 18pc in the first quarter of this year, compared with the same period in 2013, the UK’s second biggest mortgage lender the Nationwide said today.

The boom appears to have been driven by overseas demand, with London seen as a ‘safe haven’ fuelled by sterling being far weaker than it was pre-crisis that makes UK houses cheaper.

The biggest risks to the London house price boom "unravelling" are an easing of global risk that would reduce the need for a safe haven, a rise in the value of the pound that would make UK houses too expensive, and the removal of easy money, said analysts from the German bank.