The residential housing market in the UK finished 2016 strongly with prices up 1.7% month on month in December, taking the annual growth to 6.5%.
The quarterly growth was also strong, up 2.5% in the final quarter of the year, taking the average price of a home to £222,484, the figures from lender the Halifax show.
Halifax housing economist Martin Ellis said that while house prices finished 2016 strongly, slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017.
‘UK house prices should, however, continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates,’ he pointed out.
‘Overall, annual house price growth nationally is most likely expected to slow to 1% to 4% by the end of 2017. The relatively wide range for the forecast reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy this year,’ he explained.
The monthly rise was the fourth in a row recorded by the Halifax index with research from the lender showing that Luton recorded the biggest percentage rise in house prices among major UK towns and cities over the past year.
The average house price in the Bedfordshire town was 19.4% higher than in the previous year, increasing from £214,934 to £256,636 in 2016. Luton is within easy commuting distance of London and has relatively low property prices.
The outer London borough of Barking and Dagenham experienced the second biggest rise in average house prices with an increase of 18.6%. While Dunstable, Luton’s near neighbour, completed the top three with a 17.9% rise.
The Halifax report also points out that there is no sign of the acute lack of homes for sale improving in the short term with figures from the Royal Institution of Chartered Surveyors (RICS) suggesting supply is at a record low.
Jonathan Hopper, managing director of Garrington Property Finders, believes that the lack of supply will continue to drive prices upward in 2017 and his firm has found that competition among buyers in many areas is rising.
‘With interest rates still at record lows, growing numbers of buyers are deciding that now is the time to act and rising levels of mortgage approvals hint at a surge in purchases to come,’ he said, but added that there are some nerves among sellers, however, more pragmatic vendors are often willing to reduce their asking price in return for the certainty of a sale.