East leads the way for rising house prices

Meanwhile, average price growth remained stagnant.

Annual house price increases in England were driven by an annual increase in the east (8.8 per cent) and the south east (7.4 per cent).

The index also shows that the South East has been the fastest moving property market in the United Kingdom since February with the typical time on market for unsold property just 63 days, the same as it was towards the end of the last property boom in December 2007. Economists had forecast a 5% increase.

The figures showed that, in England, the average price was up 5.6 per cent at £298,000, exactly £100,000 more than in Scotland, where prices have dipped by nearly one per cent over the year.

“At a time of weak supply, it’s far from helpful that new housing stock, the lifeblood of the property market, is commanding a premium and that this premium appears to be widening”.

But house prices in Scotland are still below the record levels seen there in March, standing at £198,000 typically after dipping by 0.9%.

On a month-on-month basis, the house price index rose 0.7 percent in August to 218.5 from the record level in July, when prices increased 0.8 percent. It also limits the amount of choice available to home-movers.

He said: “We expect house prices to see solid increases over the coming months amid firm activity”.

The ONS construction industry output release for August reported a 5.8 per cent fall in new housing construction in the year to August, the largest contraction in 29 months. In many cases, the people who need the biggest hand onto the ladder are having the least support. The measure is 17.8 percent higher than the pre-economic downturn peak of 185.5 in January 2008, the ONS said.

The North East of England is the only English region where house prices have yet to surpass their 2008 peak, with average values there standing at £160,000.

Johnathan Hopper, managing director of buying agents Garrington Property Finders, said: ‘England’s property market continues to motor ahead – but in August East Anglia was in an even higher gear than London.

Prices in Wales nudged up 0.8pc to £174,000, and values in Northern Ireland rose 2.9pc to £151,000.

‘While the UK’s rate of annual price growth was unchanged, the progress is slowly becoming more broad-based – with East and South East England emerging as the star performers.