House prices rising at fastest rate since April, says Nationwide

UK house prices climbed 0.8% month in December compared to November, which was the largest month-on-month increase since April.

Nationwide, which collated the data, said this lifted the annual pace of house price growth to 4.5%, a high-month high, from 3.7% in November.

Economists suggested December's acceleration was likely to partly be a correction after house prices had only edged up 0.1% in November.

Nationwide said London house price growth increased by a break-neck 12.2% in the fourth quarter and the average British house now costs just shy of £170,000.

House price growth remained in a narrow range between 3% and 4.5% in the second half of the year, Nationwide's chief economist Robert Gardner said, which was broadly in line with earnings growth and close to the pace he expected to prevail over the longer term.

“However, as we look ahead to 2016, the risks are skewed towards a modest acceleration in house price growth, at least at the national level, despite the likelihood of interest rate increases from the middle of next year.

“Further healthy gains in employment and rising wages are likely to bolster buyer sentiment, while borrowing costs are expected to rise only gradually. However, the main concern is that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability."

Economist Howard Archer at IHS Global Insight noted that the Nationwide’s house price measure has been weaker than most other reports, with data from Halifax having for example shown house prices were up 9.0% year-on-year in the three months to November, which is double the 4.5% annual rate reported by the Nationwide for December.

Archer pointed to signs that housing market activity has recently levelled off after improving through the first half of 2015 but felt the stronger Nationwide data for December reinforced his belief that house prices are likely to see solid increases over the coming months.

"We expect house prices to rise by around 6% over 2016 amid healthy buyer interest - supported by largely decent fundamentals - and a shortage of properties. While latest mortgage approvals data for house purchases indicates that activity has recently levelled off, it is at a decent level following a pick-up over the first three quarters of 2015."