A London home billed as “the most expensive council home ever sold” is expected to fetch at least £2.3m when it goes under the hammer on Monday.

In another sign of rampant property prices in the capital, Southwark council is selling the near-200-year-old building, halfway between Shakespeare’s Globe theatre and the Shard tower, to cash in on its soaring value.

The property, which covers numbers 21 and 23 in Park Street, Borough, is on the south bank of the Thames – a short stroll across the river to the centre of the City. It needs extensive repair and refurbishment, but the council said the building could bring in “much more” than its £2.3m reserve price.

Built in 1820 to house managers of the Anchor Brewery, the property was owned by the brewer Courage before ending up in the hands of the council.

When the building became vacant the council decided it made sense to sell the five-storey Grade II-listed property and invest the money in housing stock elsewhere.

Chris Coleman-Smith, head of auctions at Savills, the estate agent that is conducting the sale, said: “We think this will be the most expensive council home ever sold, and we are delighted that the proceeds of sale will contribute to creating more housing in the borough.”

Councillors said the costs of repairing and refurbishing the properties meant that auctioning the building was the best option. Savills said the property provided “a huge amount of scope for the buyer to create two or more exceptional homes”.

Councillor Ian Wingfield said: “Selling council homes is not something I would ordinarily advocate, but this is a no-brainer in terms of the capital we will receive to invest back into housing, for improving existing stock and new-build.”

Henry Pryor, a commentator on Britain’s property market, said: “This is a complicated site with a listed building, but there is scope to create two town houses for which there is a ready demand.

“Those who will understandably fuss about the loss of social housing will take some small comfort from the council’s ability to reinvest the significant proceeds of the sale in even more housing for local residents who occupy one of the longest housing waiting lists in the country, in a borough where according to [the property website] Rightmove asking prices rose 20% over the past year.”

House prices across London increased by 8.7% in the 12 months to August, according to latest figures from the Office for National Statistics, and the property firm CBRE said on Friday it expected there to be more rises to come. It said low interest rates, increased consumer confidence and improvements in mortgage availability could support a 17% increase in UK prices over the next five years.

In London, where overseas investors add to the demand, CBRE said it expected prices to rise by a third by 2018. The wider south-east region could see a 25% uplift.

“The capital continues to witness an inflow of investment from overseas purchases, resulting in land across the region offering ‘easy trade’,” CBRE said.

“While government-backed funding schemes have improved domestic mortgage markets and accessibility for all pricing levels, an emergence of housebuilders and registered providers entering the market has made it all the more competitive, leading to an upward pressure on regional land values.”