House prices hit new record high after soaring 11% in a year with average homes now worth £189,306, new report reveals

  • House prices rose £357, or 0.8%, in August according to a Nationwide report
  • Prices have been rising for 16 months, surpassing the 2007 peak in May 
  • Nationwide also reveal 'train station premium' in Britain's biggest cities
  • London prices jump £40,000 if houses are within one mile of a station
  • In Glasgow and Manchester people are willing to pay £10,000 extra
  • House price boom driven by 20% price rises in London, say Land Registry

House prices hit a new record high this month after jumping 11 per cent over the past year, the Nationwide said this morning.

The average house price across the UK is now £189,306 – up £357, or 0.8 per cent, in just a month. This is up from the 0.2 per cent rise in July, and marks the sixteenth monthly increase in a row.

House price growth is still below the one per cent month-on-month increase recorded in June, but ‘continues to outpace earnings by a wide margin’, said Nationwide chief economist Robert Gardner.

House prices in Britain have soared over the past two decades, according to figures released by Nationwide this morning

House prices in Britain have soared over the past two decades, according to figures released by Nationwide this morning

PRICE RISES DRIVEN BY LONDON

House prices in London soared by just under 20 per cent in the past 12 months – the fastest growth in more than a decade, Land Registry figures show.

At £457,072, the average house price in London is more than two-and-a-half times the typical property across England and Wales.

The last time that prices in London saw such a large increase was in March 2003.

A total of 1,032 properties were sold in England and Wales for more than £1 million in May, which is a third higher than in May 2013. 

Around seven in 10 of these sales took place in London.

Wages have been inching up by less than one per cent a year on average, Mr Gardner said. But because of historically low interest rates houses are still affordable.

He said: ‘At a national level, housing affordability does not appear stretched by historic standards, in part due to the low level of mortgage rates.’

Mr Gardner added: ‘The cost of servicing a typical mortgage remains close to the long run average as a share of take home pay.’

Typical UK house prices first surpassed their 2007 peak in cash terms in May this year and they have been hitting new records every month since.

Year-on-year house price growth has been in double digits since April, according to the building society's study.

Despite property values reaching record highs over the summer, there have also been signs of a cool down in the market in recent months.

Mortgage approvals generally dipped after stricter lending rules, which force lenders to ask for more detail about a mortgage applicant's spending habits, came into force at the end of April but approvals have since rebounded slightly.

Nationwide said it is still unclear how much of the cooling in activity was due to the introduction of the new ‘Mortgage Market Review’ rules as opposed to an underlying loss of momentum in the market.

Robert Gardner, Nationwide's Chief Economist, said: ‘The outlook for the housing market remains highly uncertain.

‘The number of mortgage approvals fell by almost 20 per cent between January and May, suggesting that activity was cooling.’

House prices were rising at more than 25 per cent a year under Tony Blair, before crashing by more than 15 per cent after the 2007 crash

House prices were rising at more than 25 per cent a year under Tony Blair, before crashing by more than 15 per cent after the 2007 crash

Once inflation is taken into account the 'real' cost of houses in Britain has remained relatively stable over the last decade

Once inflation is taken into account the 'real' cost of houses in Britain has remained relatively stable over the last decade

House prices increased in London by 3.3 per cent in July, but fell by 0.6 per cent in Yorkshire and Humberside

House prices increased in London by 3.3 per cent in July, but fell by 0.6 per cent in Yorkshire and Humberside

He said the prospect of an increase in interest rates and the squeeze on wages was beginning to hold back soaring house prices.

Nationwide’s report this morning also revealed the ‘train station premium’ in Britain’s biggest cities.

It found that being close to an Underground or train station in London added £40,000 to a property’s value. In Glasgow and Manchester people are willing to pay around £10,000 extra to be near good transport links.

Mr Gardner said: ‘We recently examined how the proximity to a tube or railway station impacted property prices in three major cities (London, Manchester and Glasgow) after taking account of other property characteristics, such as property type, size and local neighbourhood type.

‘Our research suggests that people are willing to pay a significant premium to be close to a station.

‘The impact is most marked in London, where being located 500m from a station attracts a 10.5 per cent price premium over an otherwise identical property 1,500m from a station.

‘This is equivalent to approximately £42,000 based on the value of the typical London home. In Manchester, the premium on a typical property for being 500m from station is 4.6 per cent (£12,000), while in Glasgow the premium is 6 per cent (£9,400).

‘London homebuyers’ willingness to pay a greater premium for being close to a station compared with those in Greater Manchester and Glasgow probably reflects the greater reliance on public transport in the capital, with residents less likely to drive.

‘London also has the densest network of stations and services, with 94 per cent of properties within 1.5km of a station, compared with 72 per cent in Greater Glasgow and 69 per cent in Greater Manchester.’