Manchester and Merseyside have seen prices rocket at a “worrying rate” of more than 20% over the past year, analysis by e.surv suggests.

The latest index shows that average house prices across England rose by 13.4% in the year to May, which is the strongest annual growth rate for almost 17 years.

The average property price reached £343,658 in May, an increase of £40,500 over 12 months.

With figures for London and the South East excluded, the annual growth rate was  17.1%.

On a monthly basis, prices rose by 0.5% or £1,800 compared to April

However, monthly price increases over the last three months are the lowest since June 2020, which is probably a reflection of the stamp duty holiday nearing its end, according to analysts at e.surv. 

London and the South East have also seen house price growth but at a much lower level than some other locations. 

House prices in the capital increased by 2.8% over the past year to £648,239, but London prices boomed in the years following the global financial crisis – a rise not experienced by many other UK regions. 

Director Richard Sexton says: “Overall, we can see the market continues to enjoy the effect of the government’s stamp duty holiday. 

“Buyers are still striving to complete purchases in time to benefit from the maximum tax break ahead of the change in June to a tapered deadline.”

Sexton says there has been a shift in the kind of homes that buyers are looking for. 

He adds: “Working from home has encouraged interest in larger homes with gardens outside city centres. 

“The demand for flats in central and inner areas of London and other cities has not been as strong as for other types of homes due to lifestyle changes and new working arrangements, alongside the absence of overseas buyers in prime central London due to Covid restrictions. 

“The impact of the pandemic on flats has been amplified by the issues surrounding cladding for mortgage lenders.” 

In their joint commentary on the index, Acadata senior analysts John Tindale and Peter Williams describe prices in some regions as increasing at a “worrying rate”.

They say: “The major drivers for the current rise in house prices are: the pent-up demand developed in late 2019, along with weaker prices, the historically low interest rates which have made homes more affordable, the savings accumulated in lockdown, the lifestyle changes associated with a move to more spacious premises, the feel-good factors allied to the successful roll-out of the Covid vaccines and of course the temporary stamp duty holiday in both England and Wales. 

“In addition, in London in particular, the weaker pound has been a further factor in stimulating activity in the more exclusive markets, even though this hasn’t had a notable impact on the index at this stage. 

“With the stamp duty holidays scheduled to end in June in Wales, and in September in England, and with the furlough scheme also terminating in September, government-related support for the housing market will reduce in the third quarter of the year. 

“Previous experience does show this will have an impact – but this may be more than offset by stronger economic growth than previously anticipated.”