House price annual inflation was 8.6% in England, -0.3% in Wales, 0.1% in Scotland and 0.8% in Northern Ireland.
Annual house price increases in England were driven by an an 11.7% rise in the South East and a 10.8% rise in London.
Excluding London and the South East, UK house prices increased by 5.1%.
On a seasonally adjusted basis, average house prices increased by 0.9% between December 2015 and January 2016.
Average house prices across the UK now stand at £292,000.
Stephen Smith, Director, Legal & General Housing Partnerships, commented:
“House prices continue their steady upwards march – as they are likely to do for some time unless Britain can address the lack of housing supply in this country. With the cost of owning a home continuing to rise well above both earnings and inflation, the gap between supply and demand is pumping up prices and making ‘affordability’ an impossible dream for many – especially in London and the South East.
Adrian Whittaker, Sales Director at New Street Mortgages, added:
“The ONS figures show a market that’s continuing the strong annual growth that characterised much of 2015. Competition for property is still fierce and in this sellers’ market, the speed at which a buyer can secure a mortgage can be the difference between first and last place in the race to buy property."
Mark Posniak, Managing Director at Dragonfly Property Finance, said:
"This latest annual house price data once again throws into sharp relief the contrast between the housing markets of England, Wales, Scotland and Northern Ireland. They may be geographical neigbours but they could be thousands of miles apart in terms of house prices.
"For annual prices in the South East to have out-performed London underlines an ongoing shift in demand away from the capital as people look for more value elsewhere. London will remain a formidable bastion of the UK's property market but for many its prices are an insurmountable obstacle.
“However, the strength of demand in the months ahead may well be reduced by worries about the impact of a potential Brexit, causing many would-be buyers to sit on their hands.
"The Government's move against landlords, which officially starts next month, is a fundamental shift and has the potential to reshape the property market in the years ahead."
Jan Crosby, head of housing at KPMG, comments: “Today’s ONS figures show a record high, with England outpacing the other areas of the UK for house price growth. When you look further into the facts, the rise is driven as ever by the South East of England, London and the East of England, with the percentage increase in the capital (10.8%) over the past twelve months more than double the rest of England, when London and the South East’s rises are excluded (5.1%). Of course, this comes as no surprise, and highlights both the broken and atypical nature of the market in those areas. As ever, the issue is down to supply versus demand and while last week’s Budget did have measures, such as the Lifetime ISA, which are in part designed to help buyers onto the property ladder, the record didn’t change when it came to generating supply, with announcements effectively repeating or slightly extending previous reforms.
However, one particular Budget announcement could have an underlying effect on house prices: it will be interesting in a year’s time to see how much prices in the North have inflated, specifically around areas like Manchester and Liverpool, which are set to benefit following the Chancellor’s renewed commitment to infrastructure projects including HS3, the trans-Pennine tunnel and improvements to the M62. It is certainly likely that property investment, especially from abroad, will increase in the North and this will include housing projects – while this might be good for the economy, it could be bad news for those hoping to buy a home.”
