House prices rose 0.5% in December, according to Nationwide, evidence of a slight strengthening in the market, said the lender.

Prices in the UK increased by 3% in 2005, compared to 12.7% in 2004, according to their figures. Prices in 2006 are expected to increase by 0-3%

Commenting on the figures Fionnuala Earley, Nationwide's Group Economist, said: “After a 0.5% increase in prices in December, house prices in 2005 were 3% higher than at the end of 2004, in line with our forecast this time last year. House price growth strengthened slightly in December, up from a 0.3% increase in the previous month.”

During 2005, the price of the average house rose by just over £4,500, equivalent to £13 per day compared with an average rise of £47 per day in 2004. The second half of this year saw virtually no change in prices. The average house price in the UK is now £157,250, almost exactly the same level as in May.”

Equities outperformed house prices for the first time since 1999

This is the first time in five years that annual price inflation has been in single digits at the end of the year,” said Ms Earley.

2005 was also the first year this century that growth in the equity market has outperformed the housing market. The FTSE 100 grew by 16% in 2005, compared to housing market growth of 3%. But the FTSE still remains 10% below its 1999 level, whereas house prices are more than twice as high as than at the end of 1999.