UK house prices increase at fastest rate since June

UK house prices will only rise in a "sustained" way once housebuilding accelerates, according to Nationwide, as its latest data showed prices rose 1 per cent in April, the fastest monthly rate since June.

Robert Gardner, the building society's chief economist, said that while demand was increasing, the supply of new homes - while up from the lows of the financial crisis - was not keeping pace.

"What we need for a sustained upturn [in property prices] is for demand and supply to increase together," he said, particularly in areas such as London where demand is greatest.

Approximately 140,000 new homes were built in 2014. This compares with the postwar low of 135,000 in 2013 and the high of 219,00 in 2007 before the financial crisis.

However, analysts estimate this is at least 100,000 short of what is needed.

Mr Gardner said the conditions were "in place" for housebuilding to take off - a growing economy, falling unemployment, rising demand and low interest rates - but "we're only getting a few signs of a pick-up in supply".

"It's still very subdued," he said. "It is possible that heightened uncertainty ahead of the election is weighing on activity, though there is no compelling evidence from previous UK elections to suggest a strong impact."

Nationwide said on Wednesday it expected prices to rise by around 5 per cent this year.

Price growth has been erratic during the past few months. The price of an average home increased 1 per cent in April on a seasonally adjusted basis to £193,048, compared with a 0.1 per cent rise the month before, a fall of 0.1 per cent in February and a rise of 0.4% in January.

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The British Bankers' Association reported recently that mortgage approvals rose for the third month running in March to a six-month high. But this is still well below the long-run average and 20 per cent below early 2014.

The Nationwide survey comes a day after official data showed the UK economy in the first quarter grew at 0.3 per cent, its slowest rate since the final quarter of 2012.

Howard Archer, chief UK economist at IHS Economics & Country Risk, said he expected activity to "gradually pick up over the coming months".

"A current shortage of properties coming on to the market seems to be providing increasing support to house prices," he said. "Consequently, we expect house prices to rise by around 5 per cent over 2015."

The affordability of property has been a key issue in the general election campaign, but Mr Gardner said the proportion of people owning their own home, at just under 65 per cent, was "towards the lower end of the range" of EU member states.

"Although some other European nations have seen declines in their home ownership rates in recent years, the movement in the UK has been more pronounced," he said.

"That said, even at its all-time high of 73 per cent in 2007, the UK home ownership rate was not particularly high by EU standards. Since then, there has been significant growth in the private rental sector.

"While the UK home ownership rate may not be particularly high, the propensity for young adults (aged 18-34) to live with their parents is relatively low, a trend which has become more pronounced over the past five years."

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