- Average rate of growth in December was 9.8 per cent annually, up from 9.6 per cent in November
- Average price of a home in December was £197,865, down from £198,147 in November
- 2006 interest rate rises have so far had little effect on the market
The six major UK house price indices show an average of 9.8 per cent annualised growth for the twelve months prior to December 2006. This is a 0.2 per cent increase on the previous month (9.6 per cent).
Christmas has minor effect on growth
Christmas is traditionally a time of considerable slow down in the housing market as demand from buyers drops and sellers are reluctant to move during the festive period. However, Christmas 2006 saw a minimal drop in the price of the average UK home of just £282. The annual rate of growth continued to climb, albeit slower than during previous months, and is expected to forge ahead again as the January selling period gets underway despite January’s interest rate rise.
Interest rates
Last week’s interest rate rise, the third in six months, was a warning shot to businesses as we enter the main wage bargaining period, encouraging them to restrain wage rises by increasing their existing costs, thereby helping curb inflation. House price rises are unlikely to be seriously impacted due to the continued severe imbalance between supply and demand in the UK continuing to drive growth. Interest rates are still historically low and it will take a number of further rises to have a serious effect on the demand for property.
Average UK house price rises
The average house price, taken from the average price provided by all six major indices is £197,865, down from £198,147 in November. This shows a small decrease of just £282 in the value of the average property in the last month, but an increase of £16,149 in the twelve months from December 2005, when the average price of a home was £181,716.
Stuart Law, managing director of Assetz commented: “This year’s seasonal slowdown has been minimal despite rising interest rates. A shortage of supply will ensure that upwards pressure on prices continues, and this will only ease if the Barker Review is successful in delivering a dramatic increase in new homes, which is unlikely to happen in the short term.
“As house prices climb, younger people trying to get onto the housing ladder will become completely divided into two groups - those with parental help who can therefore afford to buy their first property, and those without parental assistance who have no choice but to continue renting or living at home.
“This, along with continued high levels of immigration and the rising number of households in the UK will drive high demand for rental properties, forcing rents to rise as borrowing becomes more expensive for investors.”
