30th December 2014
House price growth cooled for the fourth consecutive month in December to the slowest rate in a year at 7.2%, down from 8.5% in November, figures from Nationwide Building Society reveal.
The average UK house price was £188,559, but in London, prices were up 17.8% over the year to £406,730, which is 35% higher than their 2007 peak.
Wales saw the weakest annual growth, as prices rose by just 1.4% year-on-year to £141,631.
Northern Ireland had the lowest average house price at £120,685, but this was 10.2% higher than a year ago.
Robert Gardner, Nationwide’s chief economist, said: “While the pace of house price growth has moderated in recent months, activity has slowed more sharply, with the number of mortgages approved for house purchase falling to their lowest level for 16 months in October (and 22% below the level prevailing at the start of the year).
“The slowdown in housing market activity is surprising given further steady gains in employment, a pickup in wage growth (albeit from low levels) and the continued low level of mortgage rates. Moreover, surveys suggest consumers remain in high spirits – a view reinforced by robust retail spending growth in November, which was at its highest for over a decade.”
He added: “If the economic backdrop continues to improve as we and most forecasters expect, activity in the housing market is likely to regain momentum in the months ahead. Supply side developments will be crucial in determining the trajectory for prices. There are encouraging signs that construction is starting to pick up. Hopefully, this will set the stage for house price growth gradually converging with income growth in the quarters ahead.
“Recent changes to stamp duty may also have a modest positive effect on demand, especially in the South of England and Scotland.”
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The Nationwide data showing a rise of just 0.2% month-on-month in December is consistent with our view that house prices will keep on rising but at a more restrained rate.
“House prices increases are currently being reined in by an appreciable moderation in housing market activity from the peak levels seen at the start of 2014.
He added: “While the recent Stamp Duty reform should have a beneficial impact on the housing market (it is estimated that 98% of buyers will now pay less stamp duty), we doubt it will cause housing activity and prices to see a major turnaround. While we expect some pick up in housing market activity in 2015 from the recent lows, we expect the increase in activity to be limited thereby keeping a lid on house prices increases.
“On the assumption that there will be some pick-up in housing market activity during 2015 from current lows, we expect house prices to rise by a solid but unspectacular 5% in 2015. This compares with the peak double-digit annual house price increases seen earlier in 2014 (11.8% in June in the Nationwide’s case).”