London house prices hit a new all-time high in January as buyers continued to flock to take advantage of the stamp duty holiday.

The average cost of a home on the capital rose 0.1 per cent in the month to reach £501,320, an annual rate of increase of 5.3 per cent.

Prices have been rising steadily – apart from a blip in October – since the market was reopened after the first lockdown in May last year.

The market has been fuelled by Chancellor Rishi Sunak’s decision to waive stamp duty on the first £500,000 of any transaction.

The initial March 31 deadline for completed deal to qualify for the stamp duty holiday was extended to the end of June in the Budget.

Ewen Bunting, managing director of London estate agents James Pendleton said that agreed sale prices in the capital have jumped to 99.4 per cent of asking price since the Budget, up from 97.6% during the first two months of the year.

He said: “The offers we’re seeing at the moment really are electric and buyers are having to get closer to asking prices than at any point in the past five years.

“When the stamp duty extension was confirmed, there was some concern that vendors would cause the market to seize up by refusing to share the stamp duty discount but that hasn’t transpired at all.

“Demand has been so high in London that agreed sale prices are exceeding expectations and have accelerated away from the robust valuations we saw in January and February, when buyers were already in a rush to complete before the now-superseded end of March deadline.

“When it becomes a sellers’ market like this, you can count on plenty of properties going to best and final offers, and selling for well over asking price. That’s what has been happening more often in March and there’s no sign of it slowing down.”

Paul Stockwell, chief commercial officer of lender Gatehouse Bank, said:

“The housing market is off to a strong start this year with prices still being driven up annually, primarily by buyers seeking larger homes and outside space, and the early signs are that demand is going to continue in the short-term making for a busy spring and summer.

“There is also the underlying factor of limited supply due to some would-be sellers holding off putting their properties on the market over fears of spreading infection, which may continue to drive prices even higher as we enter the spring.”