Nationwide building society reports that the annual increase in the price of an average home was 5.9% in July, up 0.9% on the June figure. The average home now costs £167,733, up almost £10,000 on July 2005. This is the highest growth rate since April 2005.
Homes have become less affordable over recent years for more and more people, as house-price inflation has exceeded earnings growth. Demand has not suffered, though.Fionnuala Earley, Nationwide's group economist, identified the flourishing buy-to-let market as one of the factors in price growth, as people who have been priced out of the market have no choice but to rent.
Furthermore, rental demand has increased due to the number of migrant workers.
Earley notes that landlords still see housing as a long-term investment. Half see their rental property as a nest egg, to supplement more traditional pension investments.
Last year saw a slowdown in the growth of house prices. Many recent surveys have shown the housing market becoming more buoyant.