HOUSE prices increased by 8.4 per cent in 2013 as the UK's property market continued its revival, a report has said.

Nationwide says prices lifted by 1.4 per cent month-on-month in December to reach £175,826 on average.

In the UK, it says prices have increased year-on-year to £205,084.

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However, the report warned prices remain about five per cent below all-time highs recorded in late 2007.

The annual increase across the country is the biggest seen since June 201, with every UK region experiencing price rises, including the North, which saw a 1.9 per cent lift.

Earlier this week, Prime Minister dismissed worries the Government is pumping up a housing bubble, after hailing the success of its Help to Buy scheme.

Robert Gardner, Nationwide's chief economist, said the upturn in prices became increasingly broad-based throughout 2013.

He said: “For the second successive quarter, all 13 UK regions saw positive annual house price growth in the fourth quarter.

“Part of the reason for the acceleration in price growth is that the supply side of the market has not kept pace with the upturn in demand, even though buyer numbers remain subdued by historic standards.”

He said low interest rates are helping to keep home loans relatively affordable, but raised concerns over supply and demand.

He added: “The risk is that if demand continues to run ahead of supply in the quarters ahead, affordability may become stretched.”