According to the latest Nationwide house price index, a 1.2% increase in house prices during April saw annual growth reaching double figures for the first time since April 2010. This means the average home is now priced at £183,577, an annual change of 10.9%.
More homes needed to meet demand
According to the research, the market continues to be driven upwards by low mortgage rates and a mismatch between supply and demand for homes. “House price growth is outstripping income growth by a wide margin” said Robert Gardener, Chief Economist at Nationwide. “The risk is that unless supply accelerates significantly, affordability will become stretched."
Prices increase at the higher end of the housing market
The report suggests that the proportion of housing transactions over £500,000 increased from 13% in 2007 to 25% in 2013 in London alone. Howard Archer, chief UK economist at IHS Global Insight, conceded that while London house prices showed the strongest price growth, "the strength of house prices is not yet a serious problem outside of the capital and housing market activity is still not unduly strong compared to long-term norms, so in these respects it is premature to talk of a general housing market bubble."
Buying predicted to remain high
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, suggested that the recent introduction of new rules on mortgage lending could have an impact on activity levels within the mortgage market during the next few months, as the new measures come into force. "However” he continued, “underlying demand is likely to remain robust, as mortgage rates remain close to all-time lows and as consumer confidence improves further on the back of stronger labour market conditions and the brighter economic outlook."
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