House prices have increased for the sixth consecutive month in December, meaning house prices have risen by 9.4% since reaching a low in April 2009.
The latest figures from Halifax show that prices are now 1.1% higher on an annual basis, putting the average property at £169,042.
Prices in the final three months of 2009 were 3.5% higher than in the third quarter, according to the mortgage lender. This is the biggest quarterly increase since the final quarter of 2006, when prices rose by 4.2%.
“The significant cut in interest rates following the worldwide financial upheaval in the autumn of 2008 has markedly reduced the burden of servicing a mortgage for many households. This has helped to stimulate housing demand, albeit from a low base,” says Martin Ellis, housing economist at Halifax.
The slowing rate of unemployment has also helped boost confidence and support demand for property.
However, the outlook for property prices remains uncertain. The higher rate of VAT, and the end of the stamp duty holiday, could slow demand for housing. In addition, the 2010 election might prompt both sellers and buyers to adopt a ‘wait and see’ stance.
Elllis says: “The prospects for the market this year will depend on how the UK economy evolves and whether there is a significant increase in the supply of properties for sale. Overall, our current view is that house prices will be flat during 2010."
Other economists agree that prices will remain flat for most of the year.
Martin Gahbauer, chief economist at Nationwide, says cash-rich buyers are currently supporting housing demand – but it is not clear how long this will continue to support transactions.
He adds: “This year’s recovery has to some extent been driven by transitory factors and there are reasons to believe that it will lose momentum over the coming year. At the same time, there is no obvious catalyst on the near-term horizon that would trigger significant renewed falls in prices, such as a sharp spike in interest rates or a further pronounced tightening of credit conditions from present levels. At this stage, therefore, it seems likely that 2010 will see no significant house price movements in either direction.”