17 December 2015
Robert Gardner, Nationwide’s Chief Economist, comments:
“After moderating during the first six months of 2015, house price growth has remained in a narrow range between 3% and 4% in recent months. This is broadly in line with earnings growth and close to the pace we would expect to prevail over the longer term.
“However, as we look ahead to 2016, the risks are skewed towards a modest acceleration in house price growth, at least at the national level, despite the likelihood of interest rate increases from the middle of next year.
“Further healthy gains in employment and rising wages are likely to bolster buyer sentiment, while borrowing costs are expected to rise only gradually. However, the main concern is that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability.
“Overall, we expect UK house prices to rise by 3-6% over the next twelve months.
“It remains an open question whether the striking divergence in regional house price performance, evident in recent years, will be maintained in 2016.
“Prices in the South of England, and especially in London, have been outpacing the rest of the UK by a wide margin. Indeed, prices in the South of England are now well above their pre-crisis levels while they remain below in Scotland, Wales and large parts of the North of England.
“With affordability metrics in the capital stretched by historic standards, another year of above-average price gains appears unlikely – though in truth, we held a similar view at the end of 2014."