InvestmentsJan 3 2014

All UK regions saw 2013 house price growth

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House prices have increased by 8.4 per cent in the 12 months to December 2013, making the average UK house price £175,826, according to Nationwide.

The monthly house price index revealed that prices now remain around 5 per cent below the all-time highs recorded in late 2007.

Robert Gardner, chief economist at Nationwide said: “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 per cent in the first half of the year to 1 per cent in the second half of 2013.”

He flagged up the upturn also became increasingly broad-based over the course of 2013 as all 13 UK regions saw positive annual house price growth in the last quarter of 2013.

However, London and the south east have continued to record the strongest pace of growth, with an annual 14.9 per cent and 7.6 per cent.

Mr Gardner said: “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 added that part of the reason for 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 Q3 2013 the number of housing transactions in England was around 25 per cent below pre-crisis levels, while the number of new homes built was around 45 per cent 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, Mr Gardner said.

He said: “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 per cent 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.”