The average house price, taken from the average price provided by all six major indices is £197,865, down from £198,147 in November. This shows a small decrease of just £282 in the value of the average property in the last month, but an increase of £16,149 in the twelve months from December 2005, when the average price of a home was £181,716.

Stuart Law, managing director of Assetz, the firm that provides the index summary said, “This year’s seasonal slowdown has been minimal despite rising interest rates. A shortage of supply will ensure that upwards pressure on prices continues, and this will only ease if the Barker Review is successful in delivering a dramatic increase in new homes, which is unlikely to happen in the short term.”

Average annual growth continues

While prices dropped slightly in December, the average annual growth continued its upward movement.

The six major UK house price indices show an average of 9.8% annualised growth for the twelve months prior to December 2006. This is a 0.2% increase on the previous month (9.6%).

Last week’s interest rate rise, the third in six months, was a warning shot to businesses as we enter the main wage bargaining period, encouraging them to restrain wage rises by increasing their existing costs, thereby helping curb inflation, said Assetz’s report. House price rises are unlikely to be seriously impacted due to the continued severe imbalance between supply and demand in the UK continuing to drive growth. Interest rates are still historically low and it will take a number of further rises to have a serious effect on the demand for property.

Stuart Law said: “As house prices climb, younger people trying to get onto the housing ladder will become completely divided into two groups – those with parental help who

can therefore afford to buy their first property, and those without parental assistance who have no choice but to continue renting or living at home.”

“This, along with continued high levels of immigration and the rising number of households in the UK will drive high demand for rental properties, forcing rents to rise as borrowing becomes more expensive for investors.”