House prices in December were 1.1% higher on an annual basis. This is the first increase in the annual rate of change – measured by the average for the latest three months against the same period a year earlier – since March 2008. The annual rate has turned around markedly from a low of -17.7% in April.
Housing market activity continues to pick up. Completed house sales in England and Wales were 11% higher on an annual basis in September, according to the latest Land Registry figures. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase – a leading indicator of completed house sales – increased, on a seasonally adjusted basis, for the twelfth successive month in November. Approvals (at 60,518) were 123% higher than in November 2008 and were at their highest level since March 2008. Nonetheless, approvals remain 53% below their late 2006 peak.
Higher demand combined with low supply continues to push up house prices. Whilst there are signs that the improvement in market conditions is encouraging more homeowners to put their property up for sale, new supply is still not keeping up with the pace of rising demand.
Martin Ellis, housing economist, said: "House prices increased for the sixth consecutive month in December. The 1.0% rise between November and December was slightly below the average increase over the previous five months. Prices increased for the second successive quarter following falls in both the first two quarters of 2009.
"Prices in December were 1.1% higher on an annual basis, marking the first rise since March 2008. House prices have risen by 9.4% since reaching a low in April 2009.
"The significant cut in interest rates following the worldwide financial upheaval in the autumn of 2008 has markedly reduced the burden of servicing a mortgage for many households. This has helped to stimulate housing demand, albeit from a low base.
"The recent improvement in the labour market, highlighted by increasing numbers of people in employment in both September and October, has also supported housing demand.
"The prospects for the market this year will depend on how the UK economy evolves and whether there is a significant increase in the supply of properties for sale. Overall, our current view is that house prices will be flat during 2010."
Have your say on this story using the comment section below