House prices - Back to double digit growth

Latest data from the Nationwide Building Society shows house price growth moving back into double digits in December - the monthly increase of 1.2% giving an annual gain of 10.5%.

The average price of a home now stands at £173,746 £172,185. Put another way, the price of a typical house increased by the equivalent of £45 per day in 2006 - three and a half times faster than the £12.50 per day in 2005.

Fionnuala Earley, Nationwide's Group Economist, says there are still few signs that the rate of house price growth will moderate in the very short term. Evidence from estate agents continues to show that supply conditions are tight with fewer sellers coming to market.

Earley adds that the stock to sales ratio - a good leading indicator of house prices - has continued to increase, suggesting a few more months of firm price growth.

"However, we expect worsening affordability and recent interest rate hikes to affect the levels of activity in the market in the coming months. This will feed into a slower rate of house price growth in the second half of next year.

"The number of estate agents reporting an increase in new buyer enquiries fell back sharply in November, and while this is a more volatile indicator of house purchase approvals, it does lend some support to the view that we will soon see the start of some weakening in demand."

That said, Nationwide still expects the rate of house price growth in 2007 to be relatively robust at between 5% and 8%. Momentum gathered in 2006 will flow into the early part of 2007, and this will be supported by a buoyant economy, stable interest rates and a continuing shortage of housing supply.

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2006-12-28 11:23:42 © Moneyextra.com