London housing
The average price of a house in London is £499,000, says the ONS Reuters

The average price of a home in London will cost you £499,000, according to the Office for National Statistics.

That is more than 18 times the £27,000 average annual salary of a full-time worker in the UK.

House prices are rising sharply because low interest rates and a healing economy are fuelling higher mortgage demand against a dearth in the supply of homes.

In its monthly house price index for June 2014, the ONS said the average London price was 19.3% higher than a year before, a slowdown from May's annual growth rate of 20.1%.

For the UK as a whole, the average price was 10.2% higher in June at £265,000, though the pace of growth had slowed from May's 10.4% after being pulled down by a slower London market.

The ONS said average house prices in June 2014 stood at £276,000 in England, £167,000 in Wales, £137,000 in Northern Ireland and £193,000 in Scotland. London had the highest regional average price and the North East the lowest at £150,000.

Excluding London and the South East, where growth has been anomalously large, the average UK house price was £201,000.

Interest rates rise expected

The Bank of England is set to raise rates in early 2015, according to market expectations, which should put the brakes on mortgage demand and house price growth.

And the central bank will also move to restrict mortgage lending from October 2015, when it will limit the amount of loans worth more than 4.5 times a borrower's income banks can make.

Moreover, the Financial Conduct Authority (FCA) has forced lenders to conduct tougher affordability tests on borrowers to ensure they are able to make repayments in a number of different scenarios, such as higher interest rates or a sudden cut in their incomes.

The increasing value of the sterling should also put of some foreign investors in UK property.

All of these factors will help to ease the recent rampant pace of house price growth.