The latest figures from the Office of National Statistics also show that prices have increased across the nation with growth of 5.7% in England, 4.8% in Wales, 0.5% in Scotland and 4.8% in Northern Ireland.
But England is the only UK country where property prices are now higher than the pre-financial crisis peak of January 2008 and prices in London are increasing at more than double the UK average with growth of 12.3%.
Other areas with strong growth are the East of England with prices up 4.6% and the West Midlands with a rise of 4.3%.
Excluding London and the South East, UK house prices increased by 3.1% in the 12 months to December 2013 and on a seasonally adjusted basis, average house prices increased by 0.9% between November and December 2013.
According to David Newnes, director of LSL Property Services, the sustained price increases are encouraging as more muted, yet significant, price growth indicates that the return to health in the property market is happening in a sustainable fashion.
‘There’s certainly an infectious confidence bubbling around the marketplace, with many more aspiring buyers coming into the market. With solid growth in employment, record low mortgage rates and easing credit conditions, the property market is going from strength to strength,’ he said.
‘First time buyers have been spurred to action by cheaper rates, a boost in the available higher loan to value mortgages and government support in the form of the Help to Buy scheme,’ he explained.
‘However ultimately, a durable, successful property market requires the government to focus more on new house building in order to increase supply levels and keep up with rising demand,’ he added.
Stuart Law, chief executive officer of Assetz, pointed out that even regions that were previously struggling are now seeing growth which he believes is a huge confidence boost for the country. ‘Over the next year we will see these regions contributing even more to overall growth and we predict 10% annual growth across the UK in both 2014 and 2015,’ he said.
‘Property investment is still streets ahead compared to any other form of investment returns, however, capital growth in many areas of the country is now overtaking profits from rents which are not keeping up with house prices. Southern investors are broadly unaware of the lucrative yields available in northern markets, at prices that have not yet reflected the price growth of the next cycle,’ he added.
The figures show that the property market bucked the trend of a typical winter lull, according to Peter Rollings, chief executive officer of Marsh & Parsons. ‘Like chinks of sunlight, house price growth is breaking out across the whole country; however the picture remains gloomier in Scotland and Wales where property prices are yet to surpass the pre-financial crisis peak of January 2008,’ he said.
‘The London property market is burning the brightest, with a 12.3% annual house price increase in the capital hugely eclipsing the rate of growth witnessed elsewhere in the UK. In Prime London, the growth is even higher. We saw the average value of two bedroom properties rise by nearly £100,000 during 2013, following a 17% annual growth. Across the capital, the ratio of supply and demand remains out of kilter, which is helping to push prices upwards,’ he explained.
‘In January, 19% more buyers entered the market in competition for 28% fewer properties, compared to a year earlier. This has created a strong seller’s market, with properties selling in record time and for closer to the asking price than ever before. However, we expect a return to more normal conditions in the spring, when more people typically put their property on the market,’ he added.
David Brown, commercial director of LSL Property Services, pointed out that bricks and mortar feels more valuable today than at any time in the last seven or eight years. He believes that average prices have further to go before they start to moderate with the market now in a recovery stage from what’s been a very long trough.
‘The sheer economic power of rising house prices is enormous. There are already vital signs this is stimulating the building of more new homes,’ he said, but added that such a force can have its drawbacks too, and this is clearest in the difficulties facing first time buyers.
‘While some households are becoming better off, the very same forces are making things tougher for aspiring buyers. In fact prices are rising faster for first time buyers, more than half as quickly again. Higher loan to value mortgages and government support will prove crucial. But at some stage new buyers will need to earn enough to keep up with prices, and that could still take years,’ he explained.
‘However, in the meantime rents are rising at only a fraction of house prices, making tenancies more attractive than mortgages for many thousands of people nationwide. Landlords have invested heavily to make that possible, but they will need larger portfolios and more support from lenders to keep up with the growing generation of tenants,’ he concluded.
