Increases in the average UK house value are being led by rapidly rising London prices, according to new data released by Hometrack.
The capital saw average price growth of 12.1 per cent through 2006, far above that of the rest of the country.
In Kensington and Chelsea, an already very expensive area to buy property, house prices increased by more than 20 per cent this year, pushed up by high demands and low levels of property for sale.
"The big story of 2006 has been the strength of the bounce-back in London after the under-performance of values in this region between 2001 and 2005," said Richard Donnell, the director of research at Hometrack.
"The problem is that the 'haves' who are already on the housing ladder and driving the majority of transaction volumes appear to have largely shrugged off the recent increases in base rates," he added.
A bumper round of City bonuses early in 2007 is expected to cause a further flurry of activity on the London property market, with the prices of the most expensive properties pushed even further by a sudden mini-explosion in demand.
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