In December house prices rose unexpectedly, the first gain in over seven months, according to the latest index from the Nationwide Building Society.
The average price of a property in December was 0.4% than a year ago at £162,763, the first monthly increase since May. But prices are expected to fall in the first half of 2011 in some areas of the UK, as demand remains weak.
‘Despite December’s increase, house prices have fallen in four out of the last six months and it would be premature to suggest that the recent downward trend has been broken on the basis of one month’s figures. However, the December figures do underscore the fact the current downtrend is only very modest,’ said Nationwide chief economist Martin Gahbauer.
Prices fell 1.3% in the fourth quarter, declining in 10 out of 13 regions, Nationwide said in a separate quarterly report. The declines were led by Northern Ireland with a 3.4% drop, while East Anglia was the best performing area with a 1.6% gain. Values in London decreased 2% during the period.
‘There is little to indicate that buyer demand is set to pick up materially from current levels. As a result, the slow drift down in house prices is likely to persist in 2011, at least for the first half of the year. Whether it continues into the second half will depend on the flow of new property onto the market,’ explained Gahbauer.
Gahbauer warned that house prices could show greater declines if the Bank of England decided to raise its interest rate above its historic low of 0.5% earlier than he expected next year. ‘On balance, a relatively stable picture, with the possibility of a small price decline, appears the most likely outcome for 2011 at this stage,’ he added.
Other indices show prices falling. The latest figures from the Land Registry’s flagship house price index shows that in November prices fell 0.6% to put the average house price in England and Wales at £164,773.
Hometrack stated that prices fell for a sixth month in December and may decline 2% in 2011.
Overall the property market is in better form that in 2009. Average prices and sales volumes are up year on year, and the pace at which house prices are dropping, by no means show a property crash. The continued difficulty for first-time buyers to be able to finance their new homes is the lack of available mortgages. I’m sure that if we see a loosening of lending criteria in 2011 then the price growth could return sooner than predicted.
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