UK house prices end 2016 with 6.5% rise

House prices across the UK increased to an average of £222,484 at the end of 2016, according to the Halifax.

The UK’s largest mortgage lender said on Monday that the annual rate of growth rose for the second consecutive month, from 6.0% in November to 6.5% in December. However, the annual rate remained significantly below the 10.0% peak reached in March 2016.

Luton recorded the biggest percentage rise in house prices among major UK towns and cities over the past year. The Bedfordshire town, a one-hour commute from central London, saw average house prices rise 19.4% from £214,934 to £256,636.

The second biggest increase in average house prices was recorded in the outer London borough of Barking and Dagenham, with a rise of 18.6%. In third place was Dunstable — Luton’s near neighbour — with a 17.9% rise.

Across the whole of the UK, house prices in the final three months of 2016 were 2.5% higher than in the previous three months. Prices increased by 1.7% between November and December — the fourth successive monthly rise and the biggest since March 2016 (2.2%).

Total UK home sales in 2016 were broadly unchanged from 2015 and 2014 at 1.2 million.

Martin Ellis, Halifax housing economist, expects demand in the housing market to slow down in 2017.

“Slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017,” he explained. “UK house prices should, however, continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates.”

Ellis anticipates annual house price growth nationally to slow to 1-4% by the end of 2017.

“The relatively wide range for the forecast reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy this year,” he said.