The Nationwide says house prices will rise three to six per cent in 2016, despite the prospect of interest rate rises during the next 12 months.
“After moderating during the first six months of 2015, house price growth has remained in a narrow range between three per cent and four per cent in recent months. This is broadly in line with earnings growth and close to the pace we would expect to prevail over the longer term” according to Nationwide chief economist Robert Gardner.
But he warns that future risks will include accelerating house price growth, at least at the national level, despite interest rate rises “from the middle of next year.”
Gardner says: “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.”
But while he says national average price rises in 2016 will be three to six per cent, it is arguable whether the current divergence in regional house prices will continue.
“Prices in the South of England, and especially in London, have been outpacing the rest of the UK by a wide margin. Indeed, prices in the South of England are now well above their pre-crisis levels while they remain below in Scotland, Wales and large parts of the North of England” he says.
“With affordability metrics in the capital stretched by historic standards, another year of above-average price gains appears unlikely – though in truth, we held a similar view at the end of 2014."