HOUSE prices lifted by 9.4% year on year in February as consumer confidence continues to grow, Nationwide has reported.
The latest annual increase means prices are continuing to rise at their strongest pace in almost four years, with an 8.8% annual increase recorded in January.
Prices now stand at £177,846 across the UK after climbing by 0.6% month on month, with February marking the 14th month of increases in a row.
Despite the blossoming housing market, property values are still sitting at around 3% below their peak recorded in 2007, the building society said.
Robert Gardner, Nationwide’s chief economist, said housing market demand is being fuelled by the low interest rate environment, improved access to mortgages as well as rising consumer confidence amid an improving employment situation.
Meanwhile, a lack of supply of homes to choose from as demand grows is continuing to put an upward pressure on house prices.
Mr Gardner said: “Price growth is being supported by the fact that the supply of housing remains constrained, with housing completions still well below their pre-crisis levels, which was already insufficient to keep up with the pace of household formation.
“For example, in England, around 109,500 new homes were built in 2013, this is 38% below the level recorded in 2007 and around half the projected number of households that are expected to form each year in the years ahead.”
The Government’s Help to Buy scheme was launched in England last spring and a second version of the scheme was fired into action across the whole of the UK in October.
Mortgage lenders representing more than two-thirds of the market are taking part in the second version of Help to Buy, which offers home loans backed by the state to first-time buyers and home movers looking to buy a new-build or an existing home.
Lenders have reported seeing a surge in first-time buyer numbers in recent months. But concerns have also been growing that rising house prices are putting more pressure on people to take their first step on the property ladder amid fears they may lose out, raising the possibility that they could end up over-stretching themselves.
Mr Gardner said that cash buyers have become an increasingly important factor in the housing market in recent years. The share of house sales involving cash increased from around one fifth (20%) in 2005/6 to more than one third (35%) after the financial crisis.
But the increased share of the market that cash buyers have gained appears to have more to do with a decline in people buying a home with a mortgage amid toughened credit conditions rather than the number of cash buyers rising, he said.
The share of cash buyers in London is broadly the same as the rest of the UK, despite the attraction that the capital holds for wealthy overseas investors.
Mr Gardner suggested that relatively high house prices in London are helping to act as a cap on the number of people able to buy homes there using cash.