Prices in the provence are now growing nearly three times stronger than the next-best performing area, Scotland.
Commenting on the figures, Fionnuala Earley, group economist at Nationwide, said:
“Stronger house price growth across the whole of the UK pushed the annual rate of house price inflation in the UK up to 9.3 per cent in Q4 2006. This represents a £40 increase per day and pushed the price of a typical house up to £172,065. The top three performers in the final quarter of the year were Northern Ireland, Scotland and London, but even the relatively weaker regions in the Midlands and North have seen a marked pick-up in house price inflation this quarter.
“Northern Ireland stands out with an annual house price growth rate of 44.1 per cent - almost five times faster than the UK average and almost three times faster than the 16 per cent recorded in next-best performer, Scotland. London remains the strongest performer in England. The capital is now seeing double-digit house price growth for the first time in over two years and with large bonus payments in the City, prices could be pushed even higher over the next few months. London’s strength is continuing to spill over to surrounding regions, leading to steady gains in house prices in the neighbouring regions of Outer Metropolitan and Outer South East. While house price gains are strong in London and the South East, other parts of England are not entirely being left behind. Perhaps the most surprising story this quarter is the recovery of the Midlands and Northern English regions, which have, until recently, underperformed. The Northern region in particular saw a complete turnaround in the final quarter of the year. Prices in the Northern region increased by 8.6 per cent over the year, taking it from bottom in the English league table last quarter to third and wiping out the small fall in prices in Q3 2006. Wales saw a similar revival in 2006, experiencing an 8.9 per cent increase in prices compared to the 0.1 per cent fall experiences in 2005.
London leads the pack in England …
“The London market continued to lead the English regions in Q4 2006. House prices in the capital increased by 11.3 per cent over the past year, well above the 8.1 per cent average for England and the UK average of 9.3 per cent. During the quarter, the rate of price growth accelerated rapidly to 4.1 per cent, up from 2.6 per cent in Q3 2006. In fact, this is the highest quarterly rate of house price growth for four years. The price of a typical property in London is now £269,327 – 42.1 per cent higher than the average price in England and 56.5 per cent higher than the average price in the UK.
“House prices grew strongly across all parts of London over the last twelve months, but the strongest growth was recorded in Inner London, including the boroughs of Islington, Kensington and Chelsea and the City of Westminster. Both Eastern and Western parts of Inner London saw double-digit house price gains over the past year. The slow response of housing supply to the increase in demand, which has been boosted by higher immigration and investor demand, is an important driver of the house price gains seen in 2006 in London. In addition, the investment in transport infrastructure and development in advance of the Olympics will have benefited areas around the development sites. And with another set of large city bonus payments, further house price gains are likely in the short-term.
… but Northern Ireland price growth still streaks ahead
“Across the UK, Northern Ireland’s housing market stands out. A 12 per cent surge in prices over the past three months alone brought the annual rate to 44.1 per cent in Q4 2006. This is the highest ever rate recorded in Northern Ireland and means that prices rose by a massive £152 per day, almost four times as much as the £39 per day in England. It also means that the average house price in Northern Ireland (£181,031) is now higher than the UK average (£172,065) for the first time since Q4 1980.
“The 44.1 per cent growth is the 12th fastest in the all time ranking of UK house price growth. Northern Ireland’s performance is all the more remarkable given that all other record increases were between 1988 and 1989 when the housing market boomed on the back of the announcement of changes to tax relief.
“Scotland also maintained its strong performance with prices increasing by 16 per cent in the last year. Annual house price growth in Scotland has been in the double digits for most of the last four years. Despite this, it is still the second cheapest place in the UK, behind the Northern region, with a typical house price of £137,317. This is 80 per cent of the UK average up from 68 per cent three years ago.
“The Welsh housing market has seen prices rise by 8.9 per cent in 2006, which is remarkable given that it was one of only three regions which saw annual house price inflation turn negative in 2005. Since then, steady quarterly gains have moved it up the UK ranking to joint fourth position. This is somewhat surprising given that supply shortages are not as severe and economic conditions are slightly less supportive than in other parts of the country.
The North picks up in a bid to keep pace with the South …
“The North of England outperformed the South for three and a half years between Q2 2002 and Q4 2005. However, in 2006 the South moved ahead, led by a strong recovery in the London market. The annual rate of growth of prices in the North of England is now 6.6 per cent, compared to 9.0 per cent in the South. Given the somewhat less favourable economic conditions in most Northern regions, the underperformance may continue. However, after a shaky start to the year, all regions in the North performed more strongly in Q4. In fact, all Northern regions recorded their fastest rate of quarterly house price growth for over two years (since Q3 2004). Despite this, we expect the North to underperform the South in 2007. Admittedly, affordability is better in the North, but other economic factors such as the labour market along with more acute housing shortages will give the South more strength. Recent momentum in the market also seems stronger in the Southern regions, which have recorded more consistent gains over each quarter. In contrast, regions in the North have been a little more volatile. The best example is the Northern region, which saw a 0.5 per cent fall in house prices in Q3 2006 followed by a 4.7 per cent growth spurt in Q4. Given this volatility, it is too early to say whether the markets in the North are staging a more permanent recovery.
“Looking forward we expect that UK house price growth will be led by London and the South East where supply issues are most acute. Scotland and Northern Ireland will continue to post strong year-on-year gains but at a much slower rate than in 2006. Overall we expect the housing market to remain fairly firm across the whole of the UK in 2007."
