UK house prices increased by 1.2 per cent in April and were 10.9 per cent higher than April 2013, according to a survey by Nationwide.
Robert Gardner, Nationwide’s chief economist, said: “After several months of moderation, the pace of house price growth picked up in April, with prices rising by 1.2 per cent during the month.
“As a result, annual house price growth has reached double digits for the first time in four years, with the price of a typical home 10.9 per cent higher than April 2013.
“The introduction of Mortgage Market Review measures could have an impact on activity levels in the months ahead as the new measures bed down.
“However, 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.
“Earnings growth is beginning to pick up, with wage increases finally outpacing the rise in the cost of living in February.”
Nevertheless, house price growth is outstripping income growth by a wide margin. The risk is that unless supply accelerates significantly, affordability will become stretched.
“The upturn in construction of new homes continues to lag far behind the upturn in demand, with the number of new homes being built in England still around 40 per cent below pre-crisis levels (and this was already insufficient to keep up with the increase in the number of households being formed). MMR measures, which place a greater emphasis on affordability, should help to ensure that prices do not become detached from earnings. Higher priced areas of London and South East have experienced larger price gains.
“A notable feature of the upturn in the housing market is that price growth has been significantly stronger in the South of England, especially in London and the South East. In the first quarter of 2014, prices in the capital were around 20 per cent higher than their pre-crisis levels, while in the UK as a whole prices were still around two per cent lower.
“Interestingly, price growth in London and the South East appears to be being driven by the top end of the market, with higher priced locations recording stronger price growth.
“This pattern accords with housing transactions data, which shows that higher priced properties in London and the South East have accounted for a higher proportion of transactions. For example, in London the proportion of housing transactions involving properties over £500,000 has increased from 13 per cent in 2007 to around 25 per cent in 2013. The share involving properties of over £1m has more than doubled from three per cent to more than six per cent.”