House prices show 2009 gain of 5.9%

In its latest housing market survey, Nationwide reports that the average price of a UK home rose by 0.4% in December, compared to a month earlier, to £162,103.

The increase takes the annual rate of gain to 5.9%, up from 2.7% in November.

However, the three-month-on-three-month rate of change, which is regarded as a smoother indicator of the near-term trend, fell from 2.8% in November to 2.1% in December, and the building society cautions that out outlook for house prices remains uncertain.

Commenting on the figures, Nationwide’s chief economist, Martin Gahbauer, says: “Although house prices are still 12.2% lower than their October 2007 cyclical peak, they have now rebounded by an impressive 8.9% since their February 2009 trough.”

Looking ahead, Mr Gahbauer is hopeful the Bank of England’s base rate will remain steady at 0.5% until at least the second half of 2010, but warns that tight mortgage credit conditions mean the market will remain dependent on those with relatively large amounts of cash or housing equity.

Turning to the impact of unemployment on house prices, the economist expects significant public sector job losses next year, which may not be offset by growth in private sector employment.

He concludes: “Taking everything together, there is still a significant amount of fog clouding the outlook for house prices … it seems likely that 2010 will see no significant house price movements in either direction.”

Yesterday the Land Registry reported that the average house price in England and Wales rose for the sixth consecutive month in November, to £161,554.

The value of a typical home increased 0.9%, taking the annual rate of decline to just 0.3%, or £8,800 above its April nadir.

While Land Registry figures lag behind those of other commentators on the UK housing market, they are based on completed transactions and therefore widely regarded as the most accurate.

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