House prices increased more than expected in the United Kingdom over the month of December. According to the statement from the Nationwide Building Society, home prices jumped 0.80% on a monthly basis from November’s gain of 0.10%, marking the strongest monthly increase since April. On an annualized basis, growth advanced 4.50% in December, exceeding the prior month’s 3.70% print by a wide margin. NBS Chief Economist Robert Gardner attributed the rise in house pricing to the country’s improving economy and strengthening labour market which is predicted to bolster further gains in the coming year. The release noted that the top performing region for the 5th consecutive year was London, with dwellings appreciating by 12.20% during the year. London’s average prices are currently exceeding the 2007 pre-crisis peak by 50.00%, while prices for the entire United Kingdom are approximately 7.00% higher. In general all regions showed appreciation except for Scotland which experienced a decline of -1.90% in the final quarter compared to a year ago.
A possible lift off from the record low interest rates left in place for years by the Bank of England is predicted for the first half of 2016. However, even if a rate hike cycle transpires, it is not expected to hold back real estate appreciation. The NBS Chief Economist predicts prices will rise by 3.00% - 6.00% in 2016 amid a softening in construction activity while demand is forecast to increase further. First time buyers are facing difficulties with housing prices outpacing wage growth by a wide margin. With the housing prices crashing twice in the last 25 years, analysts fear that the general housing shortage may lead to another price bubble in the sector, paving the way towards a new crash. Measures intended to counter these developments were recently announced by Finance Minister George Osborne. The general idea is to increase taxes for buyers who wish to purchase a second home alongside accommodative measures to help expand new construction. However, time is required for these measures to take hold and temper the rapid price appreciation in housing.
UK Home Price Rise Continues Unabated
Market Trends - 30/12/2015