House prices continue to rise
Average house prices surged at their fastest pace in three and half years and hit a new five-year high in December, a leading property indicator has shown.
The 8.4 per cent annual rise in property values was the biggest since June 2010, while the average house price of £175,826 is at its highest point since April 2008 and £14,000 up on a year ago, according to the Nationwide Building Society.
The figures suggest that the revival in the property market, boosted by Government schemes in the past year, is continuing to broaden, but will add fuel to criticisms that a dangerous bubble is forming in London and the South East.
In December alone, average house prices rose by 1.4 per cent, and while Nationwide said they remain around 5 per cent below the all-time high recorded in late 2007, there seems little doubt they will pass that historic milestone later this year.
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The latest data did nothing to quell fears of a housing bubble, nor expectations that the Bank of England may be forced to raise interest rates earlier than it has previously forecast to put the breaks on accelerating prices.
Every region across the UK saw average values rise compared to the same month a year earlier: ranging from a 14.9 per cent surge in prices in London to a more sedate increase of 1.9 per cent in the North.
While the latest index contained few surprises, one was that Manchester came top among the major towns and cities with average annual house price growth of 21 per cent to reach £209,627.
Carlisle was named as the worst performer, with a 1 per cent annual increase in prices taking the average value of a home there to £136,128.
Prices in London are now 14 per cent beyond their previous annual peak, with the price of the typical home in the capital now £345,186.
And while house prices in Northern Ireland remain at around half their 2007 levels, they have climbed by 7per cent year-on-year to reach £111,612 on average.
London has the most expensive house prices in the whole of the UK while Northern Ireland has the cheapest, according to Nationwide's figures.
Scotland recorded a 3.7 per cent annual increase in house prices, pushing them to £136,729 typically, while Wales saw prices pick up by 6.1 per cent over the same period, taking the average price there to £139,722.
In England, average prices have increased by 8.6 per cent year-on-year to £205,084.
The house price index comes a day after Prime Minister David Cameron dismissed fears the Government is stoking a housing bubble as he hailed the success of its flagship Help to Buy scheme.
The second phase of the scheme was launched in October to offer state-backed mortgages to credit-worthy people struggling to get onto the property ladder or move up it if they have enough saved to provide a 5 per cent deposit.
Howard Archer, chief UK and European economist at HIS Global Insight, said a limited supply of houses was a factor pushing up prices in an increasing number of areas and not just in London and parts of the South East.
He added that he expected average house prices to grow by eight per cent this year, taking them beyond their pre-recession peak, adding there was "a very real possibility that this could prove to be a conservative forecast."