Nationwide Building SocietyHouse prices continued to rise in January according to the UK’s largest building society.

The latest figures from the Nationwide show house prices rose by 0.70% in January and are up 8.8% on the same time last year, taking the value of the average home in the UK to £176,491.

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Despite the rise house prices are still 4% below their 2007 peak.

As usual homes in London have shown the largest rise, with an increase of 15% over the past 12 months.

Commenting on the figures, Robert Gardner, the Nationwide’s Chief Economist, said: “The housing market is continuing to gather momentum on the back of further solid gains in employment, record low mortgage rates and rising confidence. House prices recorded their thirteenth successive monthly increase in January, rising by 0.7% on the month. The price of a typical home was 8.8% higher than January 2013.” (Source: Nationwide)

The figures will be used by many as further evidence that house prices are rising too quickly, creating another ‘bubble’ fuelled by low interest rates and government schemes, the like of which was last seen in 2007.

First time buyers

The figures from the Nationwide, come in the same week it was revealed some 12,875 new build homes, have been bought through the first phase of the Government’s Help to Buy Scheme.

The second phase of the scheme, launched late last year, is open to both new build and existing properties and is expected to provider a further boost to the housing market.

Robert Gardener again: “There have been encouraging signs that activity levels in the housing market are also gradually returning towards more normal levels. According to HMRC, the total number of
housing transactions increased to 103,000 in December, 30% higher than the same month in 2012. The pickup in activity appears to be fairly broad-based, and it is encouraging that first time buyers are a key driving factor behind the upturn.”

Indeed, the Nationwide also released some surprising figures relating to first time buyers:

  • Contrary to popular opinion the average age of a first time buyer has not increased significantly over recent years; in 2007 it stood at 29, by 2013 it had only risen by a year to 30
  • Whilst first time buyer numbers are down, from 97,600 in the third quarter of 2007 to 73,700 in 2013, they now make up a larger percentage of the market, up from 35% in 2007 to 44% in 2013
  • The average income of a first time buyer has actually increased slightly, from £35,500 in 2007 to £35,923 in 2013
  • At the same time the average multiple of salary borrowed by a first time buyer has fallen slightly and the percentage of monthly income taken up by mortgage payments has dropped sharply from 24% to 19%

Gardener added: “At present, the typical first time buyer home costs 4.6 times average earnings. While this is above the 20 year average of 3.6 times earnings, it is well below the highs of 5.4 recorded in 2007.”

The figures seem to indicate the problems of the past few years, which saw many first time buyers effectively excluded from the market, might be easing. Although those looking to buy in the most expensive markets, such as London and the South East, where house prices have rocketed, may well disagree.