House prices went up by 8.4% in 2013
01-06-2014
House prices went up in all 13 UK regions in the final quarter of 2013
Nationwide warns of dangers of house price bubble
• UK house prices grow at fastest rate for 3 years in June
• House prices up 0.4% in May to highest level since July 2011
By Ben Salisbury
UK house prices went up by the largest annual amount in over four years, according to Nationwide.
The lender said that average house prices in the UK went up by 8.4 per cent during 2013 and by 1.4 per cent in December and that the increase in prices was “gaining momentum as the year progressed.”
The latest data has fuelled concern that a house price bubble is emerging as the average UK property gained in value by £40 a day and the average deposit required rose to £31,000.
Manchester led the way with annual house price inflation of 21 per cent and some London boroughs including Lambeth saw prices go up by 25 per cent. Brighton saw house prices rise by 12 per cent and Leicester saw an increase of 11 per cent.
By contrast, Glasgow, Newcastle, Edinburgh and Coventry only saw prices rise by between one and two per cent.
The monthly increase was the biggest jump for over four years, since August 2009.
On a quarterly basis house prices went up by 2.9 per cent between October and the end of the year.
It means the average home in the UK is now worth £175,826, up from £174,566 in November, still five per cent below the peak seen in the final quarter of 2007.
However, the lender warned that “affordability may become stretched” if the supply of new homes does not increase to match the demand.
Nationwide’s Chief Economist Robert Gardner said that the UK housing market is following the “trajectory” of the wider economy through 2013 as monthly house price rises increased from an average of 0.4 per cent in the first half of the year to 1.0 per cent in the second half.
Nationwide said that part of the reason for the rise in house prices “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.”
The rise was driven by annual house price inflation of 14.9 per cent in London in the final quarter but the data suggests the recovery in house prices is extending across the UK.
Although house prices went up by more in London and the South East, Nationwide said the upturn was becoming increasingly broad based over the course of 2013 and for the second successive quarter, all 13 UK regions saw positive annual house price growth in the final quarter of 2013.
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.”
Nationwide said “policy measures also played an important supporting role by helping to keep mortgage rates close to all-time lows.”
However, its report warned that the rise in house prices is partly due to demand for new homes not being matched by supply.
Mr Gardner said: “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.”
Jeremy Duncombe, Director of Legal & General Mortgage Club said: “House prices look set to rise in 2014 in a similar pattern to how they grew during the latter part of 2013.
“However, there also needs to be an increase in the number of new homes being built if more people are to realise their dream of buying their own home. House builders, such as Persimmon and Barratt are still building fewer new homes each year than before the recession and expect this to continue until 2017 at the earliest.”
Howard Archer, Chief UK Economist at IHS Global said: “Limited supply of houses is a factor pushing up prices in an increasing number of areas and not just in London and parts of the South East.
“We expect house prices to increase by around 8% in 2014 with gains across the country. Furthermore, there is a very real possibility that this could prove to be a conservative forecast.”
Nationwide's figures are based on the lender's own mortgage transactions so do not give a full picture on what is happening across the country.
Meanwhile, separate figures from the Bank of England show that in November the number of mortgage approvals reached 70,758, the highest figure since January 2008.
Total outstanding debt in the UK is now £1.43 trillion, a similar figure to what it was before the financial crisis in 2007, without taking inflation into account.