Zoopla Property : House price growth picks up in December

What's the latest?

House prices rose at their fastest rate for a year in December, adding nearly £1,000 to the cost of the typical home.

Property values climbed 0.8% during the month, after no price growth was recorded in both Octoberand November.

The rise, which was the biggest monthly jump since December 2015, pushed the average home value up to £205,898, according to Nationwide Building Society.

Property prices ended the year 4.5% higher than they started it, the same increase as 2015.

But for the first time since 2008, house price growth in Londonwas below the UK average, suggesting the capital's period of outperformance may be coming to an end.

Why is this happening?

House prices continue to be supported by the shortage of properties for sale.

Despite low interest rates, affordability is becoming increasingly stretched in some regions, keeping price growth in check.

As a result, annual house price inflation has been trading in a narrow range of between 3.5% and 5.5% for the past 18 months.

Growth has been more muted in London following Stamp Duty changes, which have led to a drop in demand, particularly at the top end of the market.

Above: four-bedroom house for sale in Crowborough, East Sussex.

Who does it affect?

There was significant regional variation in the performance of house prices across the country during 2016.

East Anglia recorded the strongest growth at 10.1%, followed by the outer south east at 6.9% and the outer metropolitan area at 6.8%.

Property values in London increased by only 3.7%, the same level of growth as was recorded for the north west.

The property market was most subdued in the north, with prices edging ahead by just 0.1% in 2016, while in Northern Irelandand Scotlandthey rose by only 0.7% and 2.2% respectively.

Sounds interesting. What's the background?

Diverging house price growth across the regions in recent years has led to significant differences in affordability.

While affordability has improved in Scotland, the north, East Midlandsand Northern Ireland during the past 10 years, it has significantly worsened in London and the south east.

As a result, while average house prices cost less than 3.5 times typical earnings in Scotland and the north, they now cost more than 6.5 times earnings in the south east.

Going forward, Nationwide expects annual house price growth to slow in line with more subdued growth for the UK economy.

Robert Gardner, Nationwide's chief economist said: 'We continue to think a small gain - around 2% - is more likely than a decline over 2017 as a whole.

'Low interest rates are expected to help underpin demand, while a shortage of homes on the market will continue to provide support for house prices.'

Top 3 takeaways

• House prices climbed 0.8% in December, the biggest monthly jump for a year.

• Property prices ended 2016 4.5% higher than they started it, the same increase as 2015.

• But for the first time since 2008, house price growth in London was below the UK average, suggesting the capital's period of outperformance may be coming to an end.

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