UK property prices predicted to fall again despite recent lift
British house prices ended the year 1.1pc higher, according to figures from Halifax, the mortgage lender, marking the first annual rise since March 2008.
Halifax measures its annual rate of change by taking an average for the latest three months.
On a month-by-month basis, prices rose by 1pc -- the sixth consecutive monthly rise -- which brings the average house price to £169,042 (€188,000).
The figures show that prices have picked up steadily in recent months, having risen by 9.4pc from the trough of April 2009.
This week Irish property website Daft.ie said asking prices for Irish houses dropped 19pc last year. However in the UK, Halifax noted that the cut in interest rates had significantly reduced the cost of servicing a mortgage for many households. Recent improvements in employment figures had also supported housing demand, it said.
The Bank of England's Monetary Policy Committee announced yesterday that it has decided to keep interest rates at their current historic low of 0.5pc.
Despite the rises, Halifax, now part of Lloyds Banking Group, gave a cautious outlook for the year ahead, warning that it expected house prices to remain flat during 2010.
Martin Ellis, a housing economist at Halifax, said higher demand combined with low supply had helped push up house prices. If new sellers were to flood the marketplace, this would have a dampening effect on prices.
Mr Ellis added: "The prospects for the market this year will depend on how the UK economy evolves and whether there is a significant increase in the supply of properties for sale."
The Halifax index contrasts with figures release by the Nationwide last week, which showed house prices rising by just 0.4pc month-on-month in December, the smallest rise for eight months.
However, the Nationwide reported a greater year-on-year increase in house prices than Halifax, up 5.9pc in comparison with 2008.
Howard Archer, chief UK and European economist of IHS Global Insight, said he remained sceptical about the house price rally seen in 2009, adding that prices would be prone to "modest relapses" throughout the year.
"Indeed, we believe house prices could well fall by around 5pc over 2010 as a whole.
"Much will clearly depend on whether the economy can develop the recovery after the highly probable return to growth in the fourth quarter of 2009, how much further unemployment rises, how much earnings rise, how quickly and to what extent credit conditions ease, and how many properties come on to the market over the coming months," Mr Archer added.
Earlier this week, the Bank of England said that UK mortgage approvals climbed in November to the highest level since March 2008, adding to hopes of recovery.
Meanwhile, interest rates were left unchanged at 0.5pc by the Bank of England yesterday, as the Monetary Policy Committee (MPC) continued its policy of keeping the price of money at record lows to stimulate the flagging economy.
Members of the MPC said that they intended to continue with the £200bn (€222bn) programme of quantitative easing, which is aimed at pumping cash into the financial system until next month.