2012: a year of two halves for property prices
Flat house prices in December took the overall change in the average price to an increase of 3.2% in 2012, according to the latest LSL Property Services/Acadametrics house price index.
The price of the average home in England and Wales was £227,026 in December, up £7,000 year-on-year.
"But 2012 was a year of two halves," says LSL's director of e.surv Richard Sexton.
"In the first half of the year prices rose 3.2%, but the brakes were slammed down in the second half and brought prices to a complete standstill. The Olympics reduced sales activity in the late summer, and mortgage lending to first-time buyers also weakened over the autumn.
"It was also a year of geographic splits. The market in some northern regions remained in a state of near-paralysis thanks to the debilitating combination of public sector cuts, weak private sector growth, and a lack of mortgages for less affluent borrowers. In contrast, prices in the south of England, and particularly London, went from strength to strength during 2012.
"If the capital is stripped from the figures, the average increase in house prices during 2012 falls dramatically from 3.2% to 1.4% - well below the rate of inflation. So it's still too early to say if the market is sailing out of the financial storm just yet."
Sexton also said that "sales levels are still weak", with 4,165 fewer sales in 2012, compared to 2011. "More needs to be done to help banks lend to new buyers, because a significant improvement in first-time buyer lending is the one and only catalyst for a full market recovery."
But there is some cause for optimism. "Taken as a whole, 2012 was the most encouraging year for the housing market since the financial crisis. Prices rose by more than £7,000 over the course of the year, and 2013 looks set to be a slightly easier year for mortgage lenders, which should help improve the availability of finance for house purchases and help boost sales figures," he says.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).