A shortfall in new housing and Government policies contributed to a sharp increase in property prices in 2013.
Average house prices rose by 8.4 per cent from £162,262 in December 2012 to £175,826 in December 2013, according to the Nationwide Building Society house price index.
In December alone, average prices rose by 1.4 per cent from £174,566 in November.
Nationwide chief economist Robert Gardner says improved labour market conditions and a more positive economic outlook have caused prices to rise but Help to Buy and the shortage of new housing stock are also playing a role.
Gardner says: “Part of the reason for the acceleration in house price growth is that the supply side of the market has not kept pace with the upturn in demand, even though buyer numbers remain subdued by historic standards.”
London & Country associate director of communications David Hollingworth says: “Unless supply can keep pace with demand, it is hard to see what will stem the rate of inflation in property prices.
“Of course, people cannot afford to just keep paying more and more but until that point it will have to be a supply-side move that keeps prices under control.”