London becoming a 'city state'

The Royal Institution of Chartered Surveyors (Rics) has responded to the latest figures illustrating the rapid growth of house prices in London, describing the capital as a "property rich city state".

Rics' comments follow the latest regional price index from Halifax, which shows that the average cost of a home in London in the second quarter of the year was £313,122.

This means that a typical home in the capital would now be subject to inheritance tax, the threshold for which currently stands at £300,000.

Oliver Gilmartin, Rics senior economist, said: "A strong financial services sector has transformed London into a property rich 'city state'. London has become a property fiefdom supported by booming financial markets.

"With house prices continuing to rise in the capital, first-time buyers will struggle to access the market and with rents on the increase, would-be-buyers will labour to afford the upfront buying costs."

London is not the only location to see substantial price inflation in recent times, with prices in Newtownards, County Down, rising by 64 per cent in a year to reach an average of £228,310 in the second quarter of 2007, up from £139,610 12 months earlier.

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