Residential property prices in the UK rose by 1.7% in December compared with the previous month to reach an average of £222,484, new figures from the Halifax show.
In the three months to December, house prices were 6.5% higher compared with the same period a year earlier, up from growth of 6% in the three months to November, Halifax said.
Martin Ellis, Halifax housing economist, commented: “House prices finished 2016 strongly. Prices in the final quarter of the year were 2.5% higher than in the previous quarter. The annual rate of growth increased, rising for the second consecutive month, from 6.0% in November to 6.5%.
“Slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017.
“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.”
Halifax forecast that house prices will rise by between 1% and 4% in 2017, marking a sharp deceleration from 2016,
Halifax’s prediction is in line with most other leading forecasters. Nationwide said it is expecting a gain of around 2% in 2017, while surveyors’ body the Royal Institution of Chartered Surveyors (RICS) has plumped for 3%.
“Although recent announcements by the government on housing are very welcome, the ongoing shortfall of [housing] stock across much of the sales and lettings markets is set to continue to underpin prices and rents,” said RICS chief economist Simon Rubinsohn.
However, the UK’s largest estate agency, Countrywide, predicts a 1% fall in 2017, citing Brexit-fuelled uncertainty and higher inflation.