House prices rose by 5.9% in 2009, says Nationwide

UK house prices rose by 5.9% in 2009, making some recovery from the massive falls seen last year, the Nationwide building society has said.

The rise in prices seen this year compared with a sharp fall of 15.9% in 2008, the lender said. 

The average cost of a home went up for the eighth month in a row in December, rising 0.4% to £162,103.

However the Nationwide predicted that prices would change little over the coming year.

"This year's recovery has to some extent been driven by transitory factors and there are reasons to believe that is will lose momentum over the coming year" said Martin Gahbauer, the Nationwide chief economist.

"At the same time, there is no obvious catalyst on the near-term horizon that would trigger significant renewed falls in prices, such as a sharp spike in interest rates."

The Nationwide argued that although interest rates were likely to remain low, which would help mortgage borrowers, there was still uncertainty about whether unemployment would rise much further and whether cash rich buyers could continue to be a significant feature of the market.

As a result, it argued that the outlook for the coming year was unclear. "At this stage, it seems likely that 2010 will see no significant house price movements in either direction." Mr Gahbaur said.

"However, the experience of 2009 demonstrates how unpredictable the market is at the current juncture ad that one should always be prepared for the UK housing market surprise."

Looking further back, the Nationwide said the past decade was the strongest on record for house prices, despite the recession. Property values have risen by 117% since the end of 1999.

22 January 2010


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