A shortage of homes for sale last month sent house price growth spiralling for the seventh consecutive month to 12.6%, prompting concerns that property values are moving further out of reach of first-time buyers.

Prices of the average home increased by 1.7% in February to more than £260,000 for the first time, said the building society Nationwide, accelerating the pace of growth from 11.2% in January.

Analysts, who expected a smaller increase in prices last month, said the ending of Covid restrictions enforced because of the Omicron variant and the threat of several interest rate rises this year from the Bank of England also spurred buyers to secure homes ahead of the peak Easter buying period.

Stiff competition between lenders for mortgage business, which has driven the offers for fixed-rate mortgages lower in recent months, was another factor driving prices higher.

Nationwide said the increase pushed the average British house price to £260,230, after soaring by almost £30,000 over the past 12 months – the biggest annual increase in cash terms that its monthly index has recorded in more than 30 years of its existence.

Rural markets are booming as COVID-19 drives UK homebuyers to the countryside, with many happy to pay premium prices.

Rural locations have hit a new level of popularity among home buyers, according to Zoopla.

The rural district of Ryedale in North Yorkshire saw the highest boost in sales agreed – up 63% in the past six months, compared to the same period in 2019, data from property portal shows.

Herefordshire, one of England’s most rural areas and well known for fruit and cider production, came in second, with an uplift of 46%.

Meanwhile, Sevenoaks, which extends across Kent, otherwise known as the “Garden of England”, came in third, with sales agreed up 44%. 

“The growth in flexible working, combined with a search for more space, has led to some city-dwellers looking for a change in scenery,” said Zoopla.

“It’s not just Londoners who are exiting the city limits – the uptick in demand for rural property extends to other regions in England.”

The number of homes sold in the UK so far this year has almost caught up with the number of sales agreed in the whole of 2019 – despite the total halt brought to the property market for seven weeks of lockdown.

Whereas in recent years a surge in sales has been led by London buyers, most of the home buying hotspots for 2020 are in villages.

The figures from Rightmove are the latest indication of an urban exodus following coronavirus lockdown, with people swapping city flats for houses and outside space in more rural locations as they look to a mid-term future with less or even no commuting.

The stamp duty holiday on homes up to £500,000, announced by Chancellor Rishi Sunak in early July, has kicked both buyers and sellers into gear with tax savings of up to £15,000 available until the end of March next year.

While some villages have seen more sales agreed in the first nine months of this year compared to the whole of last year, no areas of London have achieved the same distinction.

The strongest market in the capital is in Upminster in the borough of Havering on the Essex-London border, where sales agreed so far this year are up 42 per cent on the same period last year.

“The national sales agreed trend is an important and early indicator of future completed transactions and it’s encouraging to see that whilst it’s still playing catch-up, it has been improving at pace over the past few months,” said Rightmove’s Miles Shipside.

“National statistics are drawn from hundreds of local markets, with villages and market towns peppered across the country benefiting most from the post-lockdown boom in activity and a shift in buyers seeking out more serene scenery.”

What is the problem?

Key services for many rural communities – from local policing to public transport and ATMs – have been cut relentlessly over the past eight years. Village shops, pubs and rural town high streets are also struggling to survive in the face of online competition and out-of-town superstores. The employment picture is no more optimistic, with fewer agricultural jobs available as the farming sector continues to switch to automation.

Public transport

Local authority bus budgets in England and Wales were cut by £20.5m in 2017/2018 and the number of bus journeys has dropped by 10% since 2008, according to Campaign for Better Transport. More than 3,300 bus routes in England and Wales have been reduced or withdrawn since 2010. “The lack of affordable public transport…stops people getting access to training and jobs,” says Stephen Joseph, former chief executive for Campaign for Better Transport. “It makes access to healthy food in shops more difficult. Cuts in bus services add to poverty and social exclusion, and to isolation and loneliness.”

Broadband

Up to 50% of rural homes – around 1.5 million properties – are unable to get broadband speeds of 10 megabits per second (mbps) or higher, according to Ofcom. Government data shows average rural broadband speeds are around 5mbps, compared with 25mbps or higher in most cities.

Policing

As reported in our January issue, rural crime is at an all-time high. Almost 70% of farmers and rural-specific business owners have been victims of crime in the past 12 months. Rural crime cost the UK £44.5m in 2017 – an increase of 13.4% on the previous year.

Bank and ATM closures

Analysis by Which? shows almost two-thirds of bank  branches have closed over the past 30 years; 19% of people live almost two miles from their nearest bank. In January 2019, Royal Bank of Scotland began closing 216 branches across the UK, with the loss of 1,050 jobs. Also, 300 free-to-use cash machines are closing every month. Independent operators, who manage ATMs in many rural stores, say cashpoints are increasingly unprofitable.

Automation of agriculture

Agriculture is one of the sectors most likely to be affected by automation, according to a report by the Organisation for Economic Cooperation and Development. UK agriculture currently supports around 400,000 direct jobs – from farmers to seasonal crop pickers and landscape management – but this number is dropping as robotic systems increasingly harvest crops and fruits. Driverless tractors are being developed that can plant and gather crops, while precision spraying by drones and robots is another area where human labour is set to be replaced.

Shop closures

Around 400 commercial village shops close each year, according to the Plunkett Foundation, which supports rural businesses. The internet has both positive and negative aspects for the rural economy. Businesses desperately require fast broadband to compete and operate routine tasks, while rural residents can now go online to easily buy goods not available locally. At the same time, village shops and high streets are undercut by online services with lower overheads.

House prices

The lack of new affordable housing is driving young families and working-age people out of rural areas, according to the National Housing Federation (NHF). The cheapest rural homes are 8.3 times the income of typical first-time buyers, much higher than in urban areas. The NHF says this reinforces the trend for diminishing village populations and services: almost half of households in rural areas are predicted to be aged 65 or over by 2039.

Foreign nationals should be barred from buying more than 50 per cent of houses or flats in new developments of more than 20 properties, a Conservative MP has proposed.

The 50 per cent limit is one of a series of changes put forward in a report by Croydon South MP Chris Philp to boost housebuilding towards the Government’s target of 300,000 homes a year and ensure that more new homes end up with first-time buyers.

In his report, published by the Centre for Policy Studies think tank, Mr Philp highlighted a development in Baltimore Wharf, in London’s Docklands, where 87 per cent of 2,999 apartments were sold abroad, as well as another in Manchester where 94 per cent of 230 flats went to non-UK residents, more than half of them to a company based in the British Virgin Islands.

Mr Philp said overseas buyers were taking up around 50 per cent of all new-build stock in London, including cheap flats in the suburbs. But he warned it was “a much larger issue than people imagine”, and was no longer confined to prime areas of the capital.

Soaring house prices in the UK mean that one in every 76 Britons is now a millionaire, up from one in 84 last year.

There are currently 625,000 millionaires in Britain, the highest level on record, with the number of people worth £1m having risen by 44,000 (7.6pc) in the past 12 months.

Nearly half (295,000) of the millionaires live in London and the South East, where property prices are higher than the rest of the country.

The North East is the region with the fewest millionaires, with just 12,000 people worth at least £1m in the area, according to a report by Barclays Wealth, which produces an annual UK prosperity map to rank regions and cities according to their levels of affluence

Wales and Northern Ireland each have 12,500 millionaires while Scotland is home to 30,500, the report found.

A respected group of economists, the OECD, has called on the British authorities to rein in house price growth. It is the latest in a series of warnings which suggest that house price inflation poses a threat to Britain’s economic recovery.

But how much have prices really grown?

Outside London and the surrounding regions, prices remain some way below their 2007 peak, as this map – produced by property adviser Savills and based on the latest Land Registry data from March this year – makes clear.

Let the good times roll. After years of average performance since 2008, this year saw the British property market roar back to life. According to Halifax, prices rose by 7.7 per cent across the country as a whole. In London, the figure was more than 10 per cent. Elsewhere, growth was not so strong – parts of the North and the West Country, in particular, might ask when this economic recovery is going to arrive. But in general, 2013 was a success story for British property. What will 2014 bring? Whether you are a first-time buyer or a foreign billionaire, here is what the next 12 months have in store.

The general agreement is that next year will bring more of the same for homeowners. “It will be another good year for property prices,” says Doug Shephard of home.co.uk. “Increased confidence will no doubt produce extraordinary price rises. Regional disparities that exist will continue to play out, and may well be exaggerated further by the Government’s blanket implementation of Help to Buy.” Savills agrees that 2014 will see a continued increase in prices, with Greater London catching up with prime central London. It expects the commutable area around the capital to increase by five and six per cent, with central London rising three per cent. The rest of England and Wales will see a three-four per cent increase, with Scotland lagging behind at one per cent.

The average price of a house in England could double in the next decade and hit more than £900,000 by 2034, unless there is a radical new housebuilding programme to provide nearly a quarter of a million new homes a year, a report claims today.

Research by the housing charity Shelter and consultancy firm KPMG suggests that more than half of those aged 20-34 could be living with their parents by 2040 as rising housing costs lock them out of the property market.

In a report called Building The Homes We Need, the organisations call for whichever party that wins the 2015 election to address housing in an emergency budget and a new bill, introduced within 100 days of getting into government.

An estimated 240,000 new homes are needed in England to keep up with demand from new households, but even before the financial downturn building was running at well below that level.

Last year, just under 110,000 homes were completed, and the report argues that without action the average price of a home in England, as measured by Nationwide building society, will double from its current level to reach £446,000 in 10 years.