House price growth continues to cool

Nationwide's December House Price Index revealed that annual house price growth slowed for the fourth month in a row to 7.2% from 8.5% in November, despite prices rising by 0.2% in December.

Related topics:  Finance News
Rozi Jones
30th December 2014
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House price growth also stood at 7.2% annually, after rising by 8.4% in 2013.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said:

“The pace of annual house price growth continued to soften as 2014 drew to a close, slowing from 8.5% in November to 7.2% in December. This marks the fourth consecutive month in which annual growth has moderated, despite house prices increasing by 0.2% month on month in December. The 7.2% increase recorded over the year as a whole, is modestly lower than the 8.4% gain recorded in 2013.

Gardner explained that the cooling London market was not the main explanation for the slowdown in growth.

He continued:

"Annual price growth in the capital continued to outpace every other region in the UK, at 17.8% in Q4. Overall, 12 of the 13 UK regions saw the pace of annual price growth slow.

“In many respects the regional pattern prevailing in 2013 remains in evidence, with the South of England recording significantly stronger rates of house price growth than Wales, Scotland and the North of England."

However, activity in the housing market is expected to pick up in 2015.

According to Nationwide, recent surveys suggest consumers remain in high spirits – a view reinforced by robust retail spending growth in November, which was at its highest for over a decade.

Additionally, recent changes to stamp duty may also have a modest positive effect on demand, especially in the South of England and Scotland.

The greatest impact is likely to be for homeowners looking to buy property just above £250,000, who could save around £5,000 in tax, or around 2% of the purchase price.

Nearly 590,000 purchasers in England and Wales are expected to benefit under the new regime, with an average benefit of £1,600. Nationwide estimate that around 85% of transactions in London, the South West and South East would benefit from the changes, compared with around 50% in the North, Yorkshire and Humberside, and the North West of England.

Robert Gardner concluded:

“If the economic backdrop continues to improve as we and most forecasters expect, activity in the housing market is likely to regain momentum in the months ahead. Supply side developments will be crucial in determining the trajectory for prices. There are encouraging signs that construction is starting to pick up. Hopefully, this will set the stage for house price growth gradually converging with income growth in the quarters ahead."

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