Latest Land Registry figures show a 2.6% rise in London in

House prices in England and Wales rose by an average of 0.5% in May, the Land Registry said, but the headline figure disguised huge differences around the country.

While prices in London surged by 2.6% over the month, in the north-east of England they dropped by 1.9%. Prices in London are now 7.7% higher than in May 2011 while across England and Wales they have risen by just 0.4%.

In the capital the average cost of a home has reached £365,359, more than £200,000 higher than the national average of £161,677.

The Land Registry's latest figures for transactions, which relate to March, show that the number of completed sales had increased by 25% to 58,609 compared with 46,742 in March 2011.

The number of properties sold in England and Wales for more than £1m in March 2012 was down by 41% on the previous year's figures at 501.

Russell Quirk of online estate agents eMoov.co.uk said the London property market defied economic logic.

"The outperformance of the London market has more to do with the capital's perceived status as a hedge than it does with any intrinsic strength," he said.

"Until forward momentum in the economy returns, the property market overall will continue to bump around from one month to the next with no discernible direction."