Prices increased by just 3 per cent in 2005. This is the first time in five years that annual price inflation has been in single digits at the end of the year and is well down on December 2004 figure of 12.7 per cent.
2005 was also the first year since 1999 that stocks and shares outperformed the housing market. The FTSE 100 grew by 16 per cent in 2005, compared to housing market growth of 3 per cent. But the FTSE 100 still remains 10 per cent below its 1999 level, whereas house prices are more than twice as high as than at the end of 1999.
Fionnuala Earley, Nationwides group economist, said: The rate of deceleration in the annual rate led many to predict that this was the start of a severe crash in the market. But looking at changes over three months shows the more sober path of prices during the year. In fact, prices in the last three months of 2005 rose by 1.3 per cent, more than the 0.8 per cent in the same period last year.
Nationwide expects the market to remain fairly stable in the next year and predicts that house prices in the UK will increase between 0-3 per cent in 2006.
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