Prices in the three months to September were 6.2% higher than in the same three months a year earlier. This continued the upward trend in the annual rate from March 2013 (1.1%).
In terms of monthly activity, house prices increased by 0.3% in September. Despite this being the eighth successive monthly increase, the average price in September was still 14% below the August 2007 market peak.
Home sales during June to August were 8% higher than in the previous three months (March to May) and 19% higher than in the same three months last year. The number of mortgage approvals for house purchases – a leading indicator of completed house sales – remains on an upward trend, increasing by 2% between July and August, to 62,200; the highest since February 2008. Approvals in the three months to August were 8% higher than in the previous quarter.
The number of homeowners providing instructions to put their property on the market for sale increased for the seventh successive month in August. This increase helped the supply of properties on the market to rise sufficiently to meet the increase in sales in August. Housebuilding has also shown recent signs of improvement. The number of housing starts in England in the first six months of 2013 was 22% higher than in the same period last year.
Commenting, Martin Ellis, housing economist, said:
"House prices in the three months to September were 2.0% higher than in the previous quarter; slightly below the increases recorded in June, July and August. The annual rate of increase, however, continued to rise. Prices in the three months to September were 6.2% higher than in the same three months last year.
"Housing demand has risen more quickly than supply in recent months, putting upward pressure on prices. Demand has increased against a background of low interest rates and higher consumer confidence underpinned by signs that the economy has begun a sustainable recovery. Official schemes, such as Funding for Lending and Help to Buy, also appear to have boosted housing demand.
"There are signs that supply is beginning to respond to the pick-up in demand, which if continued should help to constrain the upward pressure on prices. The recent strengthening in house prices is increasing the amount of equity that many homeowners have in their home, enabling more to put their property on the market for sale. Levels of housebuilding are also increasing, albeit from a very low base."
Alexander Gosling, director of online estate agent Housesimple.co.uk comments:
"6.2% is a big number and not far off the growth rates we all got used to pre-crash. The property market overall is far stronger than a year ago but if things carry on at the current growth rate then you get the feeling it could backfire. When the property market gains momentum, it can easily disconnect from economic reality and before we know it prices are falling again. The economy appears to be recovering but is the recovery strong enough to justify the growth we're seeing in house prices? Hand on heart, probably not.
"We may still be 1% off the August 2007 peak but then that does not suggest the market has to make up all that ground before it's potentially overvalued again. Consumers, starved of mortgages for so long, are piling back in now that loans are accessible and cheap, but wage growth is still negligible and the economic recovery is far from guaranteed. If things carry on as they are then it won't be very long before many people are priced out. And we know what happens then."
Nicholas Ayre, managing director of homebuying agency Home Fusion, says:
"The housing market continues to gather momentum after years in the doldrums. This will inevitably fuel talk of a house-price bubble, even though the recent strong increase in private housebuilding on the back of the first phase of the Help to Buy scheme is encouraging. However, will flats and houses be built fast enough to dampen rising demand and will some of the new developments in London particularly be at a price point suitable for first-time buyers?
"While prices continue to soar in London, particularly the top end of the market, transactions and lending levels are running at a fraction of what they were at the height of the housing boom. This will be a long, slow recovery and while there are fears that the second stage of Help to Buy, brought forward to next week, will fuel a bubble, the Bank of England Governor yesterday restated that he has his eye on it. There will be no return to a boom-bust cycle.
"While it's useful to keep an eye on national average indices, ultimately it's about the buyer making their own call. Don't be too swayed by the fact that indices tell us prices are rising and end up panic buying in case you are priced out further. The buyer has to pay the mortgage and needs to ensure they can afford it before taking the plunge. Interest rates may not be rising just yet but they will at some point so it's crucial that you can afford your mortgage, whether buying via Help to Buy or not."
