Resurgent demand and a falling supply of new homes helped to push house prices up by 4.4 per cent in the last year, reversing the fall of 0.3 per cent seen in 2012, property analysts Hometrack reported today.
“Demand grew at the fastest rate for three years while the supply of homes for sale grew at the lowest level recorded over the 12 year history of the survey, “ said Richard Donnell diretcor of research at Hometrack.
“Scarcity of supply was the result of higher sales volumes eroding the stock of homes for sale. The launch of Help to Buy was a clear sign of Government support for the housing market which encouraged a sustained increase in buyer numbers, especially over the second half of the year.
“Record low mortgage rates also played an important role in higher prices over 2013.”
Demand for housing grew by 25 per cent in the last year while the supply of homes for sale rose by just 6 per cent.
However, Hometrack’s data for December, gathered from estate agents, showed the first fall in demand and in new sales for 11 months.
Mr Donnell said this refelected a normal seasonal slowdown in housing market activity and pointed out that prices had still risen by 0.5 per cent in December, making it the fourth month in a row to show growth.
London and the South East continued to drive the housing market with annual price rises of 9.1 per cent and 5.0 per cent respectively.
Only the North saw a fall in prices – down 0.5 per cent – but Yorkshire and Humberside, at 0.4 per cent and the North West at 0.5 per cent saw growth well below the national average.
This trend is set to continue. Mr Donnell said: “Overall we expect the momentum in house price growth to spill over into 2014 supported by a continued lack of supply and rising demand.
“The strongest market conditions and impetus for price inflation is set to remain focused on southern England in 2014. A broader based recovery in the housing market is dependent upon growth in the real economy, jobs and household incomes.”
London has been the driving force for house price rises for the last three years. Hometrack said that the percentage of homes fetching their asking price in the capital is at its highest level since it started its survey in 2001.
Mr Donnell said that Chancellor George Osborne’s introduction of capital gains tax on overseas home owners and the growing noise about a possible mansion tax in the run-up to the 2015 election could dampen demand for the most desirable parts of central London.
He added: “Domestic demand, powered by low mortgage rates, is likely to drive the market ahead in 2014, although lower yields means investors are becoming more reliant on capital gains to boost returns and this increases the sensitivity of this group to higher mortgage rates.
“Any slowdown in London will impact sentiment across the wider housing market as well as the overall rate of growth.”