UK house prices grew 6.5 per cent year-on-year in December, Halifax said this morning, as it warned that housing demand is expected to drop in 2017.
The UK average house price reached £222,484 in the final month of the year, up 1.7 per cent on November's average - the biggest month-on-month growth since March 2016, when prices increased 2.2 per cent. House prices were up 2.5 per cent quarter-on-quarter.
Luton scored the highest increases in house prices over the year, up by a hefty 19.4 per cent, followed by Barking and Dagenham, where average house prices jumped 18.6 per cent.
Annual house price growth had dropped down from a peak of 10 per cent in March 2016.
Martin Ellis, Halifax housing economist, said: “Slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017.
"UK house prices should, however, continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates."
Ellis said that house price growth could drop to between one to four per cent by the end of the year, but that it was difficult to make exact predictions due to the uncertainty surrounding the UK economy.
The number of home sales stayed steady in 2016 at 1.2m, with sales between September and November falling by nine per cent on the same period in 2016.
Howard Archer, chief UK economist for IHS Markit, said:
Despite the robust Halifax December data, we suspect that housing market activity and prices will come under increasing pressure as 2017 progresses.
Consequently, we suspect that house price gains over 2017 will be no more than two per cent.