Tower Hamlets, east London, has Britain's most crowded dwellings and 70 per cent of its housing stock is tower blocks.

But regeneration associated with the Olympics has put a total of £21,000 on the average asking price in the borough in two months, making it the country's hottest property spot, says the property website Rightmove.

"While price rises were to be expected, £12,000 a month is pretty exceptional," said Miles Shipside, Rightmove's commercial director.

He said the entire housing market was "on the turn" with overall asking prices increasing by 1.5 per cent since last year.

The property market had managed the "soft landing" people had hoped for and a degree of optimism had returned.

"But," he added, "don't expect the market to take off again until a refuelling by more first-time buyers, lower mortgage rates and a continuation of realistic pricing by sellers and agents."

Figures from the Rightmove House Price Index, released today for the period between Sept 11 and Oct 8 show a rise in average asking prices from £195,407 to £196,348 compared with the month before. The website measures more than half of the market.

Detached houses have increased in value the most, with a 2.2 per cent increase in asking prices in the last year.

Flats and apartments, on the other hand, have increased in value by just 0.5 per cent.

Primelocation, a rival property website, warns today that the number of properties on sale in the countryside has risen by almost 50 per cent in a year.

It criticises sellers for asking artificially high prices and says prices outside London must inevitably decrease.