UK house prices rebounded in the final quarter of 2016, according to the latest data from the Halifax House Price Index.
The 2.7% quarterly rise in Q4 meant that UK house price levels more than recovered from the dip seen in Q3, when prices declined at the fastest pace for over five years (-0.6%).
In cash terms, the standardised UK property price increased to £219,556 at the end of 2016, up from £213,803 in the previous quarter. Moreover, the nominal rise over the quarter (£5,753) was the largest since Q2 2015.
Looking at the annual rate of change, the latest figures reveal that UK house prices are 6.5% higher than in Q4 2015. However, this represents a slowdown from peak seen in Q1 2016, when the annual rate of house price inflation reached its post- crisis peak (+10.1%).
Looking at prices compared with Q3, higher property prices were recorded in nine of the twelve UK regions during Q4 2016. Scotland experienced the fastest rate of house price inflation (+6.5%), followed by the North of England (+6.3%).
Wales (-6.4%) and Northern Ireland (-2.0%) registered the largest declines in Q4 2016, followed by East Anglia (-1.5%).
In London, property prices rose by 2.0%, which was the first upturn since Q1 2016, but still slower than seen across the South East (+2.5%).
Looking at how prices compared with a year ago, Northern Ireland (+12.8%) saw the fastest rate of house price inflation in Q4, followed by the West Midlands (+9.8%).
Meanwhile, the latest annual growth rate for London (+7.0%) was the lowest for three-and-a-half years. This signalled a marked slowdown from the 16-year peak seen at the start of 2016 (+21.2%).
Wales was the only area to see an outright year- on-year fall in property prices during Q4 (-4.9%).
The standard house price in London is currently £445,769 according to the Q4 data, which is more than double the UK number (£219,556).
At the other end of the scale, average house prices in Northern Ireland are the lowest of the 12 regions and £85,750 below the UK-wide figure. At its peak in 2007, the standard house price in Northern Ireland was higher than every UK region except London and the South East.
In the South East, the standardised average house price was £335,593, which exceeds the UK figure by 153% (around the largest degree since 2003).
Looking at property values in comparison to those seen prior to the global financial crisis reveals a sharp divergence in regional performance. While house prices are still 42% below peak in Northern Ireland, almost the exact opposite is true for London (+38% vs Q3 2007).
Seven of the 12 UK regions have seen house prices rise back above the peak levels recorded in 2007/08. The largest rises have been in the London and the South East (+26%).
Notably, latest data indicates that house prices in the North West have risen above their pre-financial crisis peak for the first time (+5%).
Chris Williamson, chief business economist at IHS Markit said: “The recovery of house prices in the fourth quarter adds further evidence that the UK economy has shown encouraging resilience amid Brexit uncertainty. The 2.7% rise in the three months to December contrasts with the 0.6% decline in prices seen in the three months to September.
“The latest data mean UK house prices rose by 6.5% on the year in Q4 2016, a strengthening which reflected record low interest rates, high employment and improving earnings growth, as well as the ongoing shortage of houses.
“However, with rising inflation set to eat into household spending power in the coming year and Brexit uncertainties expected to intensify, it’s likely that the housing market will cool as we move through 2017. IHS Markit expects prices to rise by just 2% in 2017.”
David Copland, director of TMA Mortgage Club, said: “Although house price inflation has continued to rise in London, it is still lagging behind the areas within the South East commuter belt. As a result, we could see homeowners working on the commuter belt moving back to the Capital, especially given the recent tube and train strikes.
“Overall, however, today’s statistics highlight both the robustness of UK house prices as well as the lack of properties available in the market. Looking ahead, it remains to be seen whether the government’s plans for a set of new garden cities and its new Starter Homes Scheme will redress this lack of supply.”
