The strongest performing regions are in the south of England - especially London. Indeed, house prices in the south of England were up 3% year on year in Q2, more than twice the 1.4% pace recorded across the UK as a whole in the three months to June.
This divergence in house price performance across the regions has been evident for some time, and, as a result, prices in the south of England are now closer to their pre- crisis level than most other parts of the UK.
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said:
“UK house price growth continued to gather momentum in June, rising by 0.3% over the month. Indeed, the annual rate of house price growth increased to 1.9% in June - the fastest pace since September 2010.
“A number of factors are likely to be contributing to the recent acceleration. Demand for homes has been supported by further modest gains in employment, as well as an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme. Signs of a modest improvement in wider economic conditions may also be playing a role in boosting buyer sentiment.
“At the same time, there are few signs that the supply of housing is improving significantly. Indeed, construction data point to a further decline in building activity in recent quarters from already depressed levels. For example, in Q1 2013 housing completions in England were down 8% compared to the same period of 2012 and around 40% below the average number of quarterly completions in 2007.
"In the UK as a whole, house prices are still around 9% below their pre-crisis peak. By contrast, London house prices reached a new all time high, 5% above their pre-crisis level.
"Amongst the home nations, England has been outperforming for some time. House prices in England are currently 5% lower than their 2007 peak, while they are 13% lower in Wales, 12% Scotland and 53% lower in Northern Ireland.”
Jonathan Hopper, managing director, property search consultants, Garrington, comments:
"For prices in the capital to be 5% above their 2007 peak is nothing short of incredible. The London property market is an extraordinary microcosm. It has effectively broken free of the rest of the UK and is operating in its own stratosphere.
"While its jobs market has been resilient, the primary driver of the growth has been strong overseas demand. The global economy remains turbulent and London is seen as a safe haven by the internationally mobile. The impact of the Olympic legacy has also seen prices shoot up in boroughs connected with the Games. The fact that Newham and Hackney have recorded such strong growth over the past quarter suggests that the legacy of 2012 may defy previous Games and prove to be a positive one.
"There is without doubt more momentum in the property market and this latest data from the Nationwide is further proof of that. The Funding for Lending Scheme, as the Nationwide acknowledges, has been a key driver of the market. Confidence is crucial to the property market and people certainly feel a lot more confident about the economy at the moment.
"The property market is, of course, far healthier in some areas than it is in others. London and the South East are very strong while many areas of the country are still showing flat, negligible or even negative growth."
Brian Murphy, head of lending at Mortgage Advice Bureau, comments:
“Homeowners will be delighted to see a third month of house price increases in Nationwide’s figures. Potential buyers will be comforted by the fact that mortgage rates are still heading in the opposite direction. As property becomes more desirable by the week, falling fixed rates mean they can still enjoy exceptionally low interest on their loans for increasingly long periods of time.
“This golden age of rate reductions is coaxing more borrowers through the door, and with the guidance of specialist brokers there are plenty of favourable deals to help them contend with rising prices – especially as lenders are playing their part with some offering low product fees.
“The onus is now on the government to agree the finer details of its mortgage guarantee scheme – and soon. Its £3.3bn commitment to social housing was a small victory in this week’s Spending Review, but a meagre share of the total £100bn investment. We must hope it encourages the private sector to put more faith in property and act now to increase housing supply.”
