But this annual rise is down from a 3.3% increase in the 12 months to December 2012 and regional differences mean that while in London prices are increasing, they are falling in Scotland and Northern Ireland.
The year on year increase reflected growth of 2.4% in England and 0.9% in Wales, which were offset by declines of 0.2% in Scotland and 5.4% in Northern Ireland.
Annual house price increases in England were driven by a 5.5% rise in London and a 3% increase in the East. Excluding London and the South East, UK house prices increased by 1.2% in the 12 months to January 2013.
On a seasonally adjusted basis, UK house prices fell by 0.7% between December 2012 and January 2013.
In January 2013, prices paid by first time buyers were 2% higher on average than in January 2012. For existing owner occupiers prices increased by 2.2% for the same period.
David Brown, commercial director of LSL Property Services, pointed out that while increasing house prices may point to improved confidence in the housing market, it is clear that many prospective buyers are still feeling the financial squeeze as they look to meet lenders’ deposit requirements.
‘The average first time buyer in the UK will have to shell out around £3,500 more for their first home than in January last year. As a result, to put together just a 20% deposit, new buyers will have to save nearly £60 pounds a month extra just to keep up with rising prices at a time when inflation is growing once again,’ he explained.
‘Whatever treats the Chancellor might have up his sleeve in the 2013 Budget tomorrow, and even with a marginal improvement in the mortgage market, the reality is still incredibly tough for the vast majority of first time buyers,’ he said
‘With a fundamental lack of new homes, as well as the ongoing difficulty buyers have in securing mortgage finance, the rental market will continue to grow to fill the gap and we will see even stronger tenant demand in the longer term,’ he added.