But the picture is mixed across the country with London outperforming all other parts, the latest house prices index from the land registry shows. It means that the average house price is now £162,606.
In London over the last 12 months prices have increased by 6.3%. While on a monthly basis Wales has experienced the greatest monthly rise with a movement of 3.6%.
The region with the greatest annual price fall is Yorkshire and The Humber with a decrease of 0.9% and the South West saw the most significant monthly price fall with a decrease of 0.8%.
The most up to date figures available show that during December 2012, the number of completed house sales in England and Wales decreased by 15% to 53,860 compared with 63,600 in December 2011.
The number of properties sold in England and Wales for over £1 million in December 2012 increased by 19% to 598 from 501 in December 2011.
The figures show a clear unbalance in the property market, according to Jonathan Haward, director of County Homesearch, with London outstripping other regions. He said there should be concern that the Land Registry data suggests that transactions outside the capital have dropped 7% in the last quarter.’ This is bad news for the wider economy as it impacts on manufacturers of white goods, builders, trades people, estate agents and surveyors and removers,’ he said.
The industry is hoping that the recently announced Help to Buy scheme might get things moving outside London. ‘By providing more shared equity loans and improving mortgage liquidity, potential first time buyers and existing home owners looking to move up the ladder can kick start the property market nationwide and fulfil their dream of owning a home,’ explained Haward.
Others are also concerned about the relatively modest 1% annual increased in prices. Peter Williams, executive director of Intermediary Mortgage Lenders Association, said that real question following last week’s Budget announcements is whether the market will grow.
‘There was already a consensus among intermediary lenders at the turn of the year that the average price may pass £164,000 by the summer. With Help to Buy’s equity loan scheme starting next week, and the mortgage guarantee programme on the horizon, the ingredients are certainly there to push house prices higher still,’ he pointed out.
‘This is why it is so important for Help to Buy to kick start house building activity. As lenders, helping borrowers to access higher loan to value deals will be of limited use if they find themselves faced with a situation where house prices, and therefore deposits, are inflated artificially,’ he explained.
‘Like the Funding for Lending Scheme, Help to Buy is a policy with a limited lifespan, whereas the need to increase the supply of property in the market is a long term challenge that will become more pressing as time passes,’ he added.
Brian Murphy, head of lending at the Mortgage Advice Bureau, agrees that a lot is riding on Help to Buy being a success. ‘With house prices creeping up to £162,606 in the last year, it shows how important it is for Help to Buy to improve access to higher loan to value (LTV) deals. Over the same 12 month period MAB has seen the average purchase deposit grow by 6.9%, adding nearly £4,000 to the typical homebuyer’s deposit,’ he said.
‘This is not just because house prices have risen, but also because the average LTV for purchase mortgages has fallen slightly from 72% to 71%. Government support is clearly welcome to prevent those with limited funds being squeezed out of the market,’ he explained.
‘It has been encouraging to see lenders respond already this year with flexible products allowing family members, for example, to act as guarantors for first time buyers’ deposits. With existing homeowners also able to call on support from Help to Buy, it will be important to ensure the new mortgage guarantees are targeted to those who need them the most,’ he added.