House prices rose a whopping 8.4% last year, after December brought the biggest monthly increase in four years.
The latest Nationwide house price index showed property did not cool over the Christmas period and jumped 1.4% in December, the largest monthly increase since August 2009.
The second half of 2013 was even better for house prices than the first half, as average monthly increases rose from 0.4% in the first six months of the year to 1% in the second half.
And it wasn’t just London and the South East that experienced the increase in property prices; in the last two quarters of the year all 13 UK regions saw positive annual house price growth.
The momentum of the property market has been fuelled by more positive labour markets and government initiatives, namely Help to Buy, which has seen 6,000 applicants for government-backed mortgages in its first three months.
Nationwide chief economist Robert Gardner said a lack of supply continued to be a problem.
‘The supply side of the market has not kept pace with the upturn in demand, even though buyer numbers remained subdued by historic standards,’ he said. ‘In Q3 2013 the number of housing transaction in England was around 25% below pre-crisis levels, while the number of new 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.’
The constraint on supply may be a blessing for homeowners, who see their property value increase, but for those trying to get on to the ladder it could lead to affordability issues.
‘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,’ said Gardner.
‘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.’