U.K. house price rise in 2005 slowest in 5 years: Nationwide

U.K. house price rise in 2005 slowest in 5 years: Nationwide

	Published : Fri, 30 Dec 2005 17:05 By : Cedric Benson Print this Story

LONDON: House prices in Britain rose by 3 per cent in 2005, failing to make it to the double digits for the first time in five years, building society Nationwide said Thursday.

However, the prices rose by 0.5 per cent in December, up from November's 0.3 per cent and against the general expectation of 0.3 per cent.

Nationwide said there was a 4,500-pound price rise during the year, or 13 pounds per day compared with an average rise of 47 pounds per day in 2004. The average price of a house is 157,250 pounds, almost the same at it was in May.

The rise in prices has been recorded by other surveys as well and mostly in the last three months there was a 1.3 per cent growth -- more than 0.8 per cent in the same period last year.

Nationwide came out with figures to indicate that for the first time in this century, equity market overtook property market, with FTSE 100 index rising by 16 per cent during the year. However, the index remains 10 per cent below its 1999 level, whereas house prices are more than twice as high as than at end-1999.

The mortgage lender predicts another interest rate cut by Bank of England to help the housing market to stabilise, but it may not help the price growth to reach the levels seen in early 2005. There could be 0 to 3 per cent price inflation through 2006.

Nationwide's economist Fionnuala Earley said a supportive environment exists for house prices as indicated by favourable economic conditions and the ongoing imbalance between demand for houses and the number of new buildings coming up.

"But affordability, particularly for first time buyers, remains a significant obstacle," she said.

Analysts believe that house prices have firmed to a limited extent in the final months of 2005, but these are relatively muted. The firming-up is not likely to lead to any sustained increase in prices soon, they said.

Earley said a cut in interest rates will clearly be favourable for the housing market, but unlike the August cut, when the market responded swiftly, this time it may not lead to an acceleration as seen in 2005.

Property website Hometrack early this week came out with similar figures to indicate modest increases in house prices in December, but a fall of 1.6 per cent overall in 2005. It had also predicted a price rise of just over 1 per cent for 2006.