London housing
Is London's bloated housing market running out of steam?Reuters

London's rapid pace of house price growth has slowed in June, according to property website Rightmove.

The online estate agency said the average London house price fell by 0.5% over the month to £589,776. This is 14.5% higher than June 2013.

And that compares to a 0.1% monthly increase in the average price for the whole of the UK, to £272,275.

The English capital has seen a sharp increase in house prices in recent years because of a chronic lack of supply and intense demand.

This demand is fuelled by its powerful city economy, large inflows of foreign investment from wealthy rent-seekers and a rising population that is expected to hit 10 million by 2030.

"The London market powers the rest of the UK, but is starting to run out of steam," said Miles Shipside, director and housing market analyst at Rightmove.

"While the legacy of rises in central London continues to ripple out to its better-value commuter-belt, fuelling price increases in all southern regions, London itself is now marking time.

"It's an example to the rest of the country of what happens when affordability and common sense get stretched too far."

The supply in the market has been given a boost by an increase in the number of London homeowners looking to cash in on the rising price of their property.

"We've reached a point where the gap between London and the rest of the country is becoming irresistible to London home owners who have for several years put off moving out," said Lucian Cook, head of residential research at property firm Savills UK .

"The result is more stock on the London market, lower levels of competition from buyers and slightly more realism from sellers when agreeing asking prices."

Cook said that constraints on borrowing, such as stricter affordability tests and the looming threat of a lending cap imposed by the Bank of England, will be "a further prompt to older first-time buyers or those looking to buy a larger home to look beyond London".

For many on low and middle incomes, the only way to buy a property will be to leave the city.