"Buyer demand continued to be fuelled by the stamp duty holiday and the desire to move to a larger property that provides a dedicated area for homeworking."
This is the highest annual growth rate the UK has seen since October 2014.
Average house prices increased over the year by 8.5% in England, 10.7% in Wales, 8.4% in Scotland, and 5.3% and in Northern Ireland.
The North West was the English region to see the highest annual growth in average house prices (11.2%), while London saw the lowest (3.5%).
On a non-seasonally adjusted basis, average house prices in the UK increased by 1.2% between November and December, compared with a decrease of 0.1% in the same period a year ago.
Nick Barnes, head of research at Chestertons, commented: “In contrast to the usual seasonal slowdown towards the end of the year, we were still seeing a very active sales market. Buyer demand continued to be fuelled by the stamp duty holiday and the desire to move to a larger property that provides a dedicated area for homeworking.
“Following a record December, the sales market has maintained momentum throughout January 2021. Compared to January last year, Chestertons registered 9% more instructions, indicating that sellers remain keen to move home. This is further highlighted by a 47% year on year increase in properties currently on the market. Equally, we have agreed 20% more sales, largely driven by house hunters rushing to meet the stamp duty holiday deadline but also possibly reflecting a desire to beat any potential shutting down of the housing market as proposed by the Labour party.
“In spite of lockdown restrictions, there are still plenty of households who are keen to move. So far in February, Chestertons has seen a 15% increase in newly agreed sales and finalised 54% more exchanges compared to the same period in February 2020. We expect this number to rise as buyers remain keen to try to beat the stamp duty holiday deadline. How the housing market reacts once the stamp duty deadline has passed remains to be seen. The news that Rishi Sunak is considering extending the stamp duty holiday deadline by six weeks will be a relief for many but how quickly the economy recovers once the lockdown restrictions are relaxed will also be a key factor.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: "With the average price of a property in the UK exceeding £250,000 for the first time in December, the housing market continued at full speed ahead as we approached the end of the year. With demand from buyers for more space - both inside and out - outstripping supply, prices inevitably edged upwards. Detached houses continue to be the property of choice, with price growth of flats continuing to lag.
"Since then, business has remained brisk as buyers try to take advantage of the stamp duty holiday and lenders and solicitors pull out all the stops to get deals across the line before the end of March. A stamp duty holiday extension for those already in the process who may just miss the deadline would be welcome.
"Mortgage pricing remains competitive, both on residential and buy-to-let deals. This is unlikely to change anytime soon, and along with some welcome easing of criteria from some lenders and return to high loan-to-value deals, the options are increasing for borrowers."
