Annual house price inflation at 9.5% is highest for ten years
House price growth has jumped to the highest level since March, according to data from the Halifax, as a lack of supply propped up the housing market since last summer’s European Union referendum.
On a monthly basis, the Halifax house price index showed prices increased by 1.7pc last month, up from 0.6pc last in November. The three-month average of year-on-year house price growth was 6.5pc last month, up from 6pc.
“The surge in house prices in December should not be read as a sign that the housing market is fizzing,” said Samuel Tombs, an economist at Pantheon Macroeconomics. He added that Halifax’s measure is volatile. This jump was far higher than the estimated consensus for monthly growth which was put at 0.3pc.
While it appears there is momentum in the market, the underlying trend “remains significantly weaker than before the referendum,” said Mr Tombs.
He added: “House prices likely will track growth in households’ incomes much more closely this year,” as mortgage rates have hit a floor and loan-to-income ratios have become stretched.
Howard Archer, an economist at IHS Global Insight said that the market has firmed up since lows in August due to the resilience of the economy after the referendum vote, and also due to the Bank of England cutting interest rates.
The Halifax also revised up its monthly increase for November from 0.2pc to 0.6pc.
This year, house prices are expected to soften, said Mr Archer. “We believe the fundamentals for house buyers will progressively deteriorate during 2017 with consumers’ purchasing power weakening markedly and the labour market likely softening.” Martin Ellis, Halifax’s housing economist said there would be “reduced housing demand in 2017” due to rising inflation and squeezed wages.
Mr Tombs predicted that house prices would increase 3pc in 2017, while Mr Archer forecast they would not grow more than 2pc.
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