Has London gone insane or is this house really worth $1.1 million?

Story highlights

  • London property recently lived in by squatters on market for $1.1 million
  • Pictures show three-bedroom home in state of disrepair
  • Estate agents says prices in area could yet increase further

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(CNN)The garden is overflowing with weeds and trash is riotously strewn across the lower floors.

Upstairs, a makeshift curtain dangles by a string while an assortment of shelves and cupboards clutter the untidy space below.

Not quite what you'd expect from a $1.1 million (£650,000) property -- but that's the price sought by the overseas owners of a house in London that until recently was the domain of illegal squatters.

The three-bedroom home came on to the market in the Peckham area of the British capital last week and is described by estate agents as "spacious" and an "exciting opportunity" for potential buyers despite the obvious need for "modernization."

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Clearly, the owners are hoping to cash in on the city's red-hot property sector. But $1.1 million?

    "Peckham as an area has witnessed a phenomenal uplift with property prices almost doubling in certain regions of the area," said Jason Morris, managing director of JT Clarke London, the estate agents in charge of selling the house when contacted by CNN.

    "For example in November 2012, our company sold a three bedroom period mid-terraced, in need of some modernization but nothing too major, for £350,000."

    "Properties on that same street with an identical footprint are now currently on the market and achieving prices in the region of £650,000 ($1.1 million). This is not an isolated case but can be seen to be true of most properties within the locality regardless of style and size."

    It's not just Peckham feeling the heat.

    Property prices in London increased by an average of 18.5% year on year in May according to the UK Land Registry, their fastest annual rise in 11 years.

    This stands in comparison to a rise of 6.5% across the rest of the UK, leading some experts to conclude that the capital's property market is overheating.

    Relatively low numbers of affordable new homes being built, generous government lending schemes designed to make deposits more affordable for first-time buyers and an influx of foreign investors plowing vast amounts into London's most salubrious districts have all played their part in the booming prices.

    While Peckham isn't traditionally one of the city's most exclusive neighborhoods, its favorable location, good transport links as well as its up-and-coming vibe has ensured its status as a desirable spot.

    Morris still believes there's more to come from the area given the underlying market conditions and high-demand for property -- although he cautions that other parts of London may soon start to cool off.

    "Although prices have gone up in general, this is the one part of Peckham that has not yet peaked," he said.

    Even still, Morris acknowledged that it is highly unusual for owners to put their property on the market in such an unkempt manner.

    "I would never advocate that any vendor puts their property on the market in such a condition unless they are open to offers that reflect the state and cost of remedial works," he said.

    "(But) such is the strength of the market at the moment that there are many who will still purchase the property as is, demonstrating that property (and especially in London) is still the number one choice for many not only as a home but also as a sure investment."

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