Prices in the three months to July were 4.6% higher than in the same three months a year earlier. This was higher than June's 3.7% increase and is the highest annual rate since August 2010 (4.6%).
House prices increased by 0.9% in July. This was the sixth consecutive monthly rise, with housing activity is also higher. Home sales in the first six months of 2013 were 6% higher than in the same period last year, at 495,000. The number of mortgage approvals for house purchases – a leading indicator of completed house sales – in the second quarter of 2013 was 6% higher than in the first quarter despite a 1% fall between May and June.
Supply, however, is still low - the increase in sales over the past year has not been matched by higher supply with the stock of unsold properties on the market lower than it was a year ago. The resulting tightening in market conditions has probably contributed to the modest upward pressure on house prices. Surveyors have, however, reported an overall increase in the number of homeowners providing instructions to sell in the last few months, which could help to bring demand and supply into better balance.
Commenting, Martin Ellis, housing economist, said:
"House prices in the three months to July were 2.1% higher than in the previous three months. This is similar to the rates of increase recorded throughout the first six months of 2013. Prices in the three months to July were 4.6% higher than in the same three months last year, the highest annual rate since August 2010. Sales have also picked up with total purchase transactions for the first half of the year 6% higher than in the same period last year.
"Signs of improvement in the economy, underlined by the recent evidence of a rise in gross domestic product in Quarter 2 and increases in employment, appear to have boosted consumer confidence. Greater confidence is likely to have underpinned the increase in housing demand. Official schemes, such as the Funding for Lending Scheme and the Help to Buy equity loan scheme, may also be raising demand. House prices are expected to continue to rise gradually through this year with only modest economic growth and still falling real earnings constraining housing demand and activity."
Mark Harris, chief executive of mortgage broker SPF Private Clients, says:
"The outlook for the housing market continues to improve as increased mortgage availability, better rates and more choice at higher loan-to-values combine to make buyers more confident about their ability to get funding.
"It is still too early to describe the housing market as being in rude health, however, as there is a worrying lack of stock, which is the main driver behind the latest rise in house prices. However, the number of transactions is also on the rise.
"London remains a unique case with many agents reviewing their forecasts for prime central London in particular. Overseas buyers are fuelling demand, with London increasingly seen as a safe haven for their money, and this shows no signs of abating. In other parts of the country, the picture is very different.
"While the number of transactions continues to rise and the Council of Mortgage Lenders also report that lending numbers are the strongest they have been since 2008, this will be a long, slow recovery. Much ground has been lost and transactions and lending levels are running at a fraction of what they were at the height of the housing boom. Government schemes such as Funding for Lending and Help to Buy are seeing a positive impact though, and we expect this to continue when the mortgage guarantee element of Help to Buy is introduced in January."
