Economists expect acceleration in house price growth in 2016 as chronic undersupply of homes worsens
UK house prices grew at their fastest pace in eight months this December, amid warnings that a shortfall of new supply could push price growth higher in the new year.
Prices rose by an average of 0.8pc in December, according to data compiled by Nationwide, an acceleration from Novemberâ€™s 0.1pc growth. The monthly rise took the annual pace of growth to 4.5pc, and the price of the average home to Â£196,999.
Robert Gardner, Nationwideâ€™s chief economist, warned that annual price growth could pick up to as much as 6pc over 2016, driven by the inability of the construction sector to keep up with growing demand.
Mr Gardner said that that in the second half of 2015 annual price growth had remained in a narrow range between 3pc and 4.5pc. â€œThis is broadly in line with earnings growth, and close to the pace we would expect to prevail over the longer term,â€ he said.
Despite an anticipated rise in the Bank of England’s interest rates next year, the Nationwide economist said that â€œgains in employment and rising wages are likely to bolster buyer sentimentâ€.
Jeremy Leaf, a north London estate agent, said that the â€œthe situation is likely to get worse before it gets betterâ€. Supply of new homes â€œis simply not increasing fast enough to keep house prices in check and is making it harder for first-time buyers to get on the ladderâ€.
While price growth was strongest in London this year, Nationwide does not expect the capital to remain the leader in 2016. â€œWith affordability metrics in the capital stretched by historic standards, another year of above-average price gains appears unlikely,â€ said Mr Gardner.