Double-digit rise in house prices

28 December 2006

UK house prices went up by 10.5% during 2006 – according to the latest figures from the Nationwide building society.  House price inflation has confounded analysts’ predictions; back in January, most said they expected the cost to go up by a mere 2% or 3%. 

Nationwide says this double-digit rise in house prices is largely due to undersupply of properties, particularly in the buoyant markets of London and the south-east of England.  Economist Fionnuala Earley, who works for the building society, said: “Evidence from estate agents continues to show that supply conditions are tight with fewer sellers coming to the market.”

These new figures show that the average home in the UK is now worth £173,746 – and is rising in value at the equivalent of £45 a day.  House prices increased three-and-a-half times faster in 2006 than the previous year. 

And as for next year?  Nationwide predicts that prices will go up between 5% and 8%.  However, the ongoing growth in house prices could add weight to those calling for further interest rate rises in the new year.