Annual house price inflation hits 9.5% in December but quarterly growth eases

7th January 2016

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Annual house price inflation bounced back in December to hit a robust 9.5% according to Halifax but underlying figures hint at a cooling in the market.

The lenders analysis showed that house prices edged ahead by 1.7% month-on-month after being flat in November and increasing 1% in October.

As a result the year-on year-increase in house prices rose back up to 9.5% in the three months to December after dipping to 9% in the three months to November from 9.7% in the three months to October.

But Howard Archer, chief UK and European economist at IHS Insight noted that there appears to be a modest underlying slowing in price growth.

Specifically, the Halifax data show house price growth eased to 1.6% quarter-on-quarter in the fourth quarter of 2015 from 1.8% in the third and a peak of 3.3% in the second quarter. There was an increase of 2.5% quarter-on-quarter in the first quarter

Archer said: “The Halifax data have been notably more volatile than other house price measures in recent months and much stronger overall than most.

“Indeed, at 9.5% in the three months to December, annual house price inflation on the Halifax measure was more than double the Nationwide’s annual house price inflation of 4.5% in December, which was actually a seven-month high. The Nationwide reported that house prices rose 0.8% month-on-month after an increase of just 0.1% in November

“This suggests it is advisable not to pin too much weight on one particular house price survey or measure or on one month’s figures, but to try and take an overall view from all the data and surveys.”

Looking ahead Archer expects house prices to rise by around 6% over 2016 amid healthy buyer interest and a shortage of properties.

But he said the upside for house prices is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the probability that interest rates will start rising gradually during 2016.

He added: “However, higher interest rates are unlikely to have a major dampening impact on the housing market as while they look set to start rising in 2016, the Bank of England is stressing that the increases will be gradual and limited.”

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