House prices declined by 0.2% in December, but increased by 1% in 2011 as a whole and at the end of the year the price of a typical home is now £163,822.
London has seen the strongest growth in 2011 but there have been less regional variation in house prices compared with previous years.
‘The 1% rise in house prices recorded over the past twelve months could hardly be described as a strong performance, but against a backdrop of anaemic economic growth and a deteriorating labour market, UK house prices were surprisingly resilient in 2011,’ said Robert Gardner, Nationwide's chief economist.
‘Resilience was less evident in other areas of housing market activity in 2011. For example, the number of mortgage approvals remained low, at just over half the long term average,’ he added.
On a quarterly basis average house prices in the UK rose by a modest 0.3% in the three months to the end of the year. The annual rate of change increased from -0.5% to 1.1%.
London saw the strongest fourth quarter growth rate, with prices up 2.6% quarter on quarter. This pushed the annual rate of growth up to 5.4%, making London the best performing region over the past year.
Most English regions ended the year with prices higher than the fourth quarter of 2010. Only the North and North West saw price falls, with average prices down 1% and 1.2% respectively.
Scotland saw no change in prices during the quarter, and the annual rate of change remained negative at -0.8%. Wales saw a 0.9% fall in prices in the fourth quarter but thanks to strong growth in previous quarters, average prices ended the year up 1.5%. While in Northern Ireland, which was the worst performing region for the fourth consecutive year, average prices were down 8.9% compared with the same quarter in 2010.
Looking ahead, the Nationwide does not see much change in 2012. ‘There is no sign of an end to the eurozone crisis and, since the single currency area is the UK’s largest trade partner, this will continue to weigh on our export performance at a time when the UK is unusually reliant on international trade to drive its recovery,’ said Gardner.
‘Deteriorating labour market conditions and elevated inflation are already holding back household spending, while austerity measures are restraining public expenditure. Against this backdrop the UK economy is likely to expand by less than 1% again in 2012, far below the 3% growth rates that were the norm before the onset of the financial crisis,’ he explained.
He predicts that there might be a slight shift in favour of buyers. ‘With the UK economy struggling to gain momentum, labour market conditions are likely to remain challenging in 2012, deterring buyers from entering the housing market. This may tip the demand/supply balance in favour of buyers,’ he said.
‘However, there are few indications that a flood of properties is about to hit the market, so tight supply conditions will continue to provide some support for prices. The outlook is very uncertain, and will depend crucially on how the wider UK economy performs. Nevertheless, as things stand, the housing market in 2012 looks likely to be characterised by low levels of activity once again, with prices moving sideways or modestly lower over the course of the year,’ he added.
