Fionnuala Earley, Nationwides Group Economist, recently said that: “Both housing market and weather forecasters were surprised by the warm climate in 2006. The temperate weather is likely to have played only a minor role, but the UK housing market clearly warmed up during the year.

"House prices increased three and a half times faster than last year and returned to double digits for the first time since February 2005. December’s increase of 1.2% brought the annual growth rate up to 10.5%, way above the widespread expectation this time last year that annual house price growth would be in low single digits. The price of a typical house increased by the equivalent of £45 per day in 2006 - three and a half times faster than the £12.50 per day in 2005 - bringing the price of a typical house up to £173,746."

Nationwide say that evidence from estate agents, continues to show that supply conditions are tight with fewer sellers coming to market. Stock to sales ratio – a good leading indicator of house prices – has continued to increase suggesting a few more months of firm price growth.
However, Earley expects to see “worsening affordability and recent interest rate hikes to affect the levels of activity in the market in the coming months. This will feed into a slower rate of house price growth in the second half of next year. The number of estate agents reporting an increase in new buyer enquiries fell back sharply in November, and while this is a more volatile indicator of house purchase approvals, it does lend some support to the view that we will soon see the start of some weakening in demand.”