UK house price inflation drops

UK house price inflation has fallen to its lowest level in a decade, dropping sharply to 3 per cent from last year's 12.7 per cent, according to Nationwide, raising hopes that the once-soaring property market has averted a crash through a soft landing.

Annual price growth was the lowest since 1995, when prices fell by 2.5 per cent compared with the previous year on Nationwide's index.

After four years of double-digit growth, which peaked in 2002 with a 25 per cent rise in annual prices, housing this year is set to underperform the growth in average earnings for the first time in 10 years.

It is also the first year since 1999 that the FTSE100 has outperformed the housing market.

Nationwide, the largest UK building society, said yesterday: "The rate of deceleration in the annual rate led many to predict that this was the start of a severe crash in the market.

But looking at changes over the past three months shows the more sober path of prices during the year."

It said the average house now costs £157,250 (€228,577), almost exactly the same as in May.

House prices have picked up since the autumn.

Nationwide said prices increased by 0.5 per cent in December from November's 0.3 per cent.

Fionnuala Earley, its chief economist, said housing was still expensive, especially for first-time buyers.

Ms Earley predicted a stagnant housing market next year with prices rising by 0 per cent to 3 per cent, in line with many other forecasters. - (Financial Times service)