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Average house prices in UK hit record high of £255,000 in December
UK-Houses in old city/Pixabay

The BBC reported according to UK lender Nationwide, average house prices in the UK hit a record £254,822 in December.

The typical house is now worth £23,902 more than it was in January, making it the strongest year for price rises since 2006.

But Nationwide predicted the market would slow next year because the stamp duty holiday, which ended in September, saw buyers bring purchases forward.

And it warned that slowdown could be made worse by the spread of Omicron.

UK-London-River Thames/Pixabay
UK-London-River Thames/Pixabay

"The Omicron variant could reinforce the slowdown if it leads to a weaker labour market," Nationwide's chief economist Robert Gardner said.

Interest rate rises

He said that even if the economy remains strong, higher interest rates were likely have a "cooling influence" on the housing market.

It suggests the lender may be expecting further increases to interest rates in the new year. Earlier this month, the Bank of England raised rates to 0.25% from their historic lows of 0.1% in a bid to tackle rising inflation.

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Further increases in the cost of borrowing would mean fewer people are able to gain a foothold on the property ladder.

"House price growth has outpaced income growth by a significant margin over the past 18 months and, as a result, housing affordability is already less favourable than before the pandemic struck," Mr Gardner said.

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Wales saw the highest growth with prices increasing 15.8% compared to the same time last year. Meanwhile, price increases in London slowed compared to last year, climbing just 4.2%.

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Speaking to the BBC's Today programme, Andrew Harvey, a senior economist at Nationwide, said the pandemic had caused a change in the behaviour of buyers who had been looking to leave large cities in favour or suburban and rural areas.

He said: "I think London probably has suffered as a result of that."

Source: BBC