UK house prices rose by 8.4% in 2013 as the economy started to gain momentum, according to the latest House Price Index from the Nationwide Building Society.
The annual rise meant the average home was now valued at £175,826, with the change driven by annual house price growth in London of 14.9%, although prices rose in all regions.
However, the average UK property price remains 5% below the peak in prices in late 2007.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, 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% in the first half of the year to 1% in the second half of 2013. Overall, prices increased by 8.4% in 2013, though they remain around 5% below the all-time highs recorded in late 2007.
“The upturn also became increasingly broad based over the course of 2013. For the second successive quarter, all thirteen UK regions saw positive annual house price growth in Q4, though London and the South East continued to record the strongest pace of growth (click here for our quarterly report on regional house price developments).
“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.
“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 Q3 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.
“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.”
Courtesy of Financial Adviser