Quarterly price increase of 0.3% brought annual house price rise to 7.8% in December and average price to £188,858

This article is more than 5 years old

This article is more than 5 years old

House prices in the UK rose by just under 8% in 2014, adding £14,600 to the cost of the average property, according to the Halifax.

A quarterly price increase of 0.3% brought annual house price inflation to 7.8% in December and the average property price to £188,858, the UK’s largest mortgage lender said.

This was considerably down on increases earlier in the year, with annual house price inflation hitting a peak of 10.2% in July.

Martin Ellis, housing economist at the bank, said that the combination of rising prices, low earnings growth and speculation about an interest rate rise had led to a drop in the number of sales in the last few months of 2014, which had slowed further growth.

He said that he expected house price growth to continue in 2015 but by a far more modest 3% to 5%.

“Housing demand should continue to be supported by a growing economy, rising employment levels, still low mortgage rates and the first gain in ‘real’ earnings for several years,” he said.

Howard Archer, chief economist at IHS Global Insight, said that the evidence from both the Halifax and Nationwide showed that “house prices have been reined in significantly in recent months”.

The Nationwide reported that house prices had ended the year 7.2% higher than they had started it but that this annual inflation was at its lowest for a year. The building society put the average property price at £188,559, only £300 less than the Halifax’s finding.

Nationwide also said it expected activity in the housing market to pick up in the months ahead, a view shared by Archer.

“We suspect that the weakening of buyer interest in houses may be close to bottoming out and we see it picking up to a limited extent in 2015 from current levels,” he said.

He added that this was partly due to reforms to stamp duty, which were brought in in December 2014 and should result in savings for anyone buying a house worth under £900,000. He also said that elevated consumer confidence, high and rising employment, and still-low mortgage interest rates should help the market.

Lenders have already kickstarted the year with a mortgage price war that has resulted in the lowest ever two-, five- and 10-year fixed rate mortgages.

However, not all economists are convinced the property market will see further rises this year. On Wednesday, the Centre for Economics and Business Research said the threat of higher interest rates, the May general election, greater supply and fewer foreign buyers would send the market into reverse in 2015.

The CEBR is predicting prices will fall 0.6% in the year ahead, with London seeing the first marked falls for more than five years. It said prices in the capital would dip by 3.3%, though that comes after gains of 16.8% in 2014.