House prices fell 1% in December

House prices fell by 1.0% in December, according to data from the Halifax. Prices in Q4 were 4.2% higher than in 2006 Q3.

House prices increased by 9.9% in 2006, just above the long-term average of 8% per year.

In Greater London, the average price increased to £287,176 by the end of the year. It is now above the inheritance tax threshold (currently £285,000) for the first time. Halifax again calls on the government to commit to linking the IHT threshold to house price inflation.

The average price in the South West broke through the £200,000 barrier for the first time in 2006 Q4 to £200,931. The 10.5% increase in prices in the South West in 2006 represented a recovery following a 1.9% fall in 2005. Similarly, prices in East Anglia also achieved double digit growth (13.0%) after a small fall in prices (-1.0%) in 2005.

As expected, house price inflation remained modest in northern England in 2006. The North recorded the lowest regional rise during the year (3.1%), the smallest increase in the region since 2000.

Northern Ireland experienced a 53% increase in its average house prices in 2006, from £128,917 in 2005 Q4 to £196,874 in 2006 Q4. The increase in Northern Ireland was the biggest regional annual gain since 1988 (West Midlands: 60%).

Commenting, Martin Ellis, Chief Economist, said: "House prices fell by 1% in December, but it remains too early to conclude that this indicates a genuine slowdown in the housing market. Overall, prices in the final quarter of 2006 were 4.2% higher than in the previous quarter, marking the strongest quarterly rise since 2004 Q2.

Continued economic growth, rising employment and an ongoing lack of supply will continue to drive up house prices over the coming months. Higher interest rates, greater pressure on household finances and subdued real earnings growth will, however, constrain housing demand. We expect house prices to increase by 4% in 2007."