UK house prices increased by 1.4% in December and were 8.4% higher than a year before but are still around 5% below 2007 peak levels, according to the latest index from the Nationwide Building Society.
UK house prices increased by 1.4% in December and were 8.4% higher than a year before but are still around 5% below 2007 peak levels, according to the latest index from the Nationwide Building Society.
Its latest monthly report shows that the UK housing market followed the trajectory of the wider economy through 2013, gaining momentum as the year progressed. The average monthly increase in house prices rose from 0.4% in the first half of the year to 1% in the second half of 2013.
The lender’s quarterly index shows that the price of a typical UK house rose by 2.7% in the fourth quarter of after allowing for seasonal effects. Prices were up 7.1% over the year as a whole.
House price growth continued to accelerate in London, reaching 14.9%, the highest growth rate since the first quarter of 2010 which means that prices in London are now 14% above their 2007 peak, with the price of a typical London home at £345,186.
Prices in Northern Ireland were up 7% year on year, although from a low base, with the fourth quarter of 2012 marking the trough in the prolonged downturn in the province’s house prices. Indeed, prices in Northern Ireland are still around half the level prevailing in late 2007.
Scotland saw a 3.7% annual increase in prices while Wales saw a pick up in annual price growth to 6.1%, from 3.6% in the third quarter.
Amongst the English regions, the South of England and the Midlands continued to outperform the North. Outside of London, the Outer Metropolitan was the strongest performing region, with annual price growth of 8.6%, whilst the North continued to be the weakest English and also UK region, with prices up 1.9% over the year.
‘The upturn also became increasingly broad based over the course of 2013. For the second successive quarter, all 13 UK regions saw positive annual house price growth in the fourth although London and the South East continued to record the strongest pace of growth,’ said Robert Gardner, Nationwide’s chief economist.
He pointed out that a large part of the pickup in the housing market can be attributed to further improvements in the labour market and the brighter economic outlook, which helped to bolster sentiment amongst potential buyers. ‘Policy measures also played an important supporting role by helping to keep mortgage rates close to all time lows and improving the availability of credit, especially for those with smaller deposits,’ he explained.
‘Part of the reason for the acceleration in house price growth is that the supply side of the market has not kept pace with the upturn in demand, even though buyer numbers remain subdued by historic standards. For example, in the third quarter of 2013 the number of housing transactions in England was around 25% below pre-crisis levels, while the number of new homes built was around 45% lower. Moreover, even in the pre-crisis period, the pace of construction was below that required to keep pace with the increase in the number of households, adding further weight to the notion that the supply side of the market remains constrained,’ said Gardner.
‘Affordability is being supported by the ultra-low level of interest rates. A typical mortgage payment for a first time buyer is currently equal to around 29% of take home pay, close to the long term average. However, the risk is that if demand continues to run ahead of supply in the quarters ahead, affordability may become stretched. House price growth has been outstripping average earnings growth since the middle of the year,’ he added.