The housing market ended 2015 with a bang as property prices rose at the fastest pace since January last year, official figures show.
The biggest rises were recorded in commuting towns within reach of London as homebuyers increasingly search for more affordable housing outside the capital, according to the latest figures by the Land of Registry.
As the number of transactions continued to fall, average property prices in England and Wales were £11,318 more expensive in December compared to a year before, costing £188,270.
Going up: House prices rose at the fastest annual pace in 11 months last December
This is an annual increase of 6.4 per cent – the biggest rise since January 2015, when they soared by 6.6 per cent. On a monthly basis, they rose 2.1 per cent. But in London, prices continued to buck the national trend, growing at almost double the pace than in the rest of the country.
The average home in the capital cost a whopping £514,097 in December – a 12.4 per cent increase on last year and a 2.1 per cent rise on November.
This has led many people to look for cheaper properties outside the capital, causing prices in commuting towns to jump.
Reading, a large town in Berkshire which is just half an hour commute from Paddington station in London, saw the biggest annual rise, with the average price rising 17.1 per cent to £266,045, the data shows.
The Land Registry index, which is based on completed house transactions, found that the number of sales transactions has decreased over the last year.
New instructions also only edged up in December after falling over the previous 10 months and the average stocks of properties per surveyor were still at a survey low at the end of last year.
Jeremy Leaf, a former RICS chairman and north London estate agent, says that the decline in number of property transactions continues to be a worry.
‘If people aren’t able to move in and out of the market when they want to, there will be an inevitable knock-on effect for the rest of the economy.
‘With the high cost of moving, continued shortage of supply and affordability issues with tougher mortgage criteria, this situation looks unlikely to change any time soon.’
Powering ahead: Prices soared in every region in England and Wales compared to last year
Leaf also said that the shortage of housing in London was pushing prices up, with people moving to outer tows which are easy to commute to.
‘Buyers are finding better value than in London although if property prices continue to rise at the same pace that may no longer be true.
‘With trains taking only half an hour into Paddington, you can get there faster from Reading than the suburbs, while living in parts of Berkshire will mean a reasonable quality of life.’
Rob Weaver, director of investments at property crowdfunding platform Property Partner, said: ‘Potential buyers have been searching outside prime central London for more affordable housing, attracted also by regeneration in places like Thamesmead and Woolwich, and of course, Crossrail.
‘We’ve also seen significant upward trends west of the capital and on the M4 corridor with commuter towns like Reading, Slough, Windsor and Maidenhead racing ahead.
‘This is clear evidence that the UK housing market is incredibly diverse across the regions, highlighting a north-south divide with Yorkshire and The Humber and the North East seeing tiny annual increases.’
House prices: London, as usual, saw the biggest rise, while Wales the smallest
While prices have soared in all regions compared to last year, the North East has seen the smallest increase of 0.8 per cent, with the average property costing £99,069 in December.
Wales saw the most significant monthly price decrease with a fall of 0.8 per cent, although average prices rose 3.4 per cent to £121,780 compared to December 2014.
Howard Archer, chief economist at IHS Global Insight, said house prices were likely to see solid increases over the coming months amid healthy buyer interest and a shortage of properties. He expects house prices to rise by around 6 per cent this year.
‘Indeed, the increased likelihood that interest rates may not rise until at least the fourth quarter of 2016 could very well give a boost to housing market activity,’ he said.
And added: ‘Furthermore, there are signs that housing market activity is currently being lifted by buy-to-let investors looking to make a purchase before April’s rise in Stamp Duty for the sector (this was certainly suggested by the December RICS survey).
Two speed: London house prices rose at almost double the pace than the rest of the country
In last November’s Autumn Statement, Chancellor George Osborne imposed a 3 per cent surcharge on stamp duty on purchases of buy-to-let properties and second homes from April 2016.
‘This could well exert upward pressure on house prices in the near term. Post April, this move may modestly dilute housing market activity and upward pressure on prices,’ Archer added.
Another report published this week by Nationwide also found that prices continued to rise at the beginning of the year and suggested that the UK property market showed no signs of slowing in the year ahead.
House prices inched up by another 0.3 per cent month-on-month and by 4.4 per cent on a yearly basis in January to hit an average of £196,829, according to Nationwide.
The seemingly unstoppable rise in house prices is giving confidence to more homeowners that their homes will rise in value this year.
Figures by Clydesdale and Yorkshire Banks out today show that confidence has doubled since 2013 and is only slightly less than it was in 2015.
The new findings also show that only 2 per cent of the population are concerned that their home will decrease in value while 48 per cent anticipate no change.