House Price Growth Accelerates In December

British house price growth quickened by more than expected in December to hit an eight-month high, according to a new survey, another sign of growing momentum in the housing market.

Mortgage lender Nationwide said house prices rose 0.8 percent in December, the strongest monthly increase since April and compared with a 0.1 percent increase in November.

Robert Gardner, Nationwide’s chief economist, said: “After moderating during the first six months of 2015, house price growth remained in a narrow range between 3 per cent and 4.5 per cent in the second half of the year”.

In fact, the price of a typical United Kingdom home now stands at a new record of £196,999, which may not come as welcome news to those struggling to get on the housing ladder.

House prices advanced 4.5 percent from a year ago in December, the fastest since May. Indeed, prices in the South of England are now well above their pre-crisis levels while they remain below in Scotland, Wales and large parts of the North of England.

He added that house prices are likely to rise from 3% to 6% over the next 12 months.

“Prices in the South of England, and especially in London, have been outpacing the rest of the United Kingdom by a wide margin”.

“The main concern is that construction activity will lag behind strengthening demand”, explained Gardner, “putting upward pressure on house prices and eventually reducing affordability”. In the south, prices have increased by 8.9 per cent annually, while those in the north have seen a far smaller 1.6 per cent annual rise. This is where prices rise dramatically due to demand and speculation amid a limited supply, only to later crash when interest rates rise and demand decreases.

Growth in London was the strongest for the fifth year in a row, with prices over the final quarter of 2015 12.2 per cent ahead of a year earlier, taking the average to £456,229.

According to Nationwide, five United Kingdom regions saw the annual rate of growth slowdown in the last quarter of 2015, while seven saw increases accelerate.

But he warned that average house prices would “be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the probability that interest rates will start rising gradually during 2016”.