UK house prices may have ended last year around £15,000 higher on average than when the year started, but the signs are that prices will continue to rise, supported by a ‘critical shortage’ in housing supply and ‘ultra-cheap borrowing rates’.
House prices across the UK as a whole increased by 7.2% in the year to December, accelerating from a 6.1% rise recorded in the year to November, pushing the average price of home up to £220,000, according to the Office for National Statistics (ONS).
The average price of a residential property is now £236,000 in England, £148,000 in Wales and £142,000 in Scotland, according to the ONS.
The East of England was the region with the highest annual growth, according to the ONS, with prices increasing 11.3% in the year to December 2016. Growth in the South East of England was 8.5% for the year. London, which continued to be the region with the highest average house price, at £484,000, was the third fastest-growing region with prices rising by 7.5% in the year to December.
Property prices in all three regions have been pushed higher mainly by a widening supply-demand imbalance in the market, coupled with record-low mortgage borrowing rates, and this trend looks set to continue, not just in London, the East and South East of England, but across the UK as a whole, according to Rob Weaver, director of investments at property crowdfunding platform Property Partner.
He said: “At the risk of sounding like a broken record, the critical shortage in supply, alongside ultra-cheap borrowing rates are supporting house prices and that looks set to continue.
“Until more properties are built for both buying and renting, the market for investors looks positive as prices continue to move upwards although overall at a gentler pace than before.”
Tax changes, stricter lending criteria and regulation appear to have been somewhat dampening buy-to-let demand, but Weaver points out that owner occupiers remain the “driving force behind prices”, particularly in the regions.
He added: “The housing market may have plateaued during last summer but for the final two months of 2016, prices regained momentum.
“With December, in particular, seeing a higher than expected rise in annual prices, property demonstrated itself to be a robust investment once again in 2016.”