City level house price inflation over the first three months of 2016 reached 4.2%, the highest rate of quarterly growth for 12 years, Hometrack has reported.

Its tracker found this came as the normal seasonal increase in demand was boosted by demand from investors ahead of changes to stamp duty. The year on growth for the 20 city house price index is running at 10.8%, ahead of 8.7% across the UK.

Hometrack stated that in the recent past, periods of accelerating house price growth have coincided with changes in market sentiment and demand – such as the introduction of Help to Buy in 2013 and after the 2015 General Election.

The highest increase in house prices in the last quarter was recorded in Liverpool as prices rise off a low base, closing the gap to other major cities such as Manchester and Leeds where house price growth is running at over 7% per annum – the highest year on year growth since 2007.

With the stamp duty deadline now over, Hometrack believes the question is how weaker investor demand will impact house price inflation in the second quarter of 2016. This at a time when home buyers start to consider the implications of the EU referendum for the economy and mortgage rates.

Hometrack believes house prices will continue to rise but a moderation in investor demand and greater caution in the run up to the EU vote will limit further acceleration in house prices. The firm expects the rate of house price growth to slow more rapidly in high value, low yielding cities such as London where house prices will be more responsive to weaker investor demand.

Tanya Jackson, Yorkshire Building Society’s head of corporate affairs, said: “The surge of landlords looking to beat the increase in stamp duty boosted house prices in Q1, particularly in areas which offer higher rental yields. However, with the new rules coming into force earlier in April, the question now is how the market will react to the upcoming EU referendum.

“We may see more subdued growth in the run up to the EU vote as people wait until they can be more certain of the outcome and its impact on the economy. The outlook beyond that will be in part influenced by the EU referendum decision but, regardless, demand is likely to continue to outpace supply, causing house prices to increase beyond wage growth in the future.

“The UK population’s desire to own a property remains strong, where our research found that 69% of young Britons believe homeownership is essential to their success in life. Homeownership is clearly a priority for many, and facilitating homeownership should be equally as high on the government’s agenda so that we can help more people to realise their aspirations in life.”