House prices rise slightly in 2010

4 January 2011

House prices rose only slightly during 2010, with a small annual increase of 0.4%, according to Nationwide.

The lender also reported a monthly increase of 0.4% in December. It puts the average UK house price at £162,763.

The three month on three month rate of change rose from -1.3% in November to -1.0% in December. Nationwide says this is consistent with "modestly declining house prices".

Last year the housing market was "a tale of two halves", firstly characterised by the continuing upward momentum in prices seen in 2009, followed by a marked change in the supply-demand balance.

According to the lender, this trend pushed down buyer demand and combined with tight credit conditions and low levels of consumer confidence resulted in downward pressure on house prices.

This flat outcome is in line with expectations and as Martin Gahbauer, Nationwide's chief economist, points out, when house prices are falling only modestly, it is not unusual to see a mixed pattern of monthly declines and increases.

This trend was seen throughout 2010 as frequently the monthly house price indices from different sources gave varying results.

Although prices did rise slightly in December, they have fallen in four out of the last six months, based on Nationwide's reports. But Gahbauer points out that December's increase shows that the current downtrend is very modest, especially in comparison with the second half of 2008.

Geographically London, the South East and Sandbanks in Dorset remain the most expensive areas to buy a house. According to Lloyds TSB the most expensive streets are in South West London, with an average price of £5,058,000 in the famous SW19 postcode area.

Looking forward, Gahbauer thinks it's unlikely buyer demand will pick up as there are currently too few buyers chasing too many properties. He says the drift in house prices is set to continue into the first half of 2011 and will only change if the flow of new properties into the market increases.

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