The information, compiled by the Office for National Statistics (ONS), showed prices increased by 1.2% over the month to December as the property market experienced a mini-boom caused by the stamp duty holiday deadline and pent-up demand.

According to the data, annual house price growth was weakest in London, which experienced price increases of 3.5%. This compared to the North West of England which saw the highest price gains of 11.2% annually.

Jonathan Hopper, CEO of Garrington Property Finders, said these figures ‘defied all expectations’. He added: “For the annual rate of price inflation to climb to 8.5%, up from the already breathless pace seen in November, shows what a formidable head of steam the market built up in the second half of 2020.

“Clearly this data, which records prices paid in the month before the re-imposition of a national lockdown at the start of January, may prove a high-water mark. For now at least.”

However, he said transactions had inevitably slowed in January and February and descried the market currently as a ‘parked car with the engine revving loudly’.

Hopper added: “Broadly it has split into three categories: existing transactions are frantically being progressed to try and beat next month’s Stamp Duty deadline, while estate agents report that new stock is chronically low even as new buyer registrations continue to build.”

Distorted figures

Meanwhile, John Eastgate, managing director of property finance at Shawbrook Bank, thought the figures were high because the market had been distorted by the rush to complete before the stamp duty deadline.

“They must be taken with a pinch of salt,” he said. “Homeowners and investors shouldn’t set too much store by shorter term measurements but instead focus on the longer term.

“House prices will continue to be underpinned by the imbalance between supply and demand, not to mention the challenges of mortgage affordability.

“This creates a certain level of resilience in the market that should support long term capital growth, despite volatility in the short term.”

He added: “For well-intentioned buyers and sellers there is an immediate fear of sales falling through if they don’t meet the end of March deadline, so it’s encouraging to hear that the government is considering an extension.

“However, ministers must also consider longer-term solutions to address the challenges in the market rather than more sticky-tape quick fixes.”