UK house price growth remained relatively stable throughout 2016, but is set to slow to around 2% this year, according to Nationwide.
Its latest House Price Index showed that annual house price growth was 4.5% in December, the same as the rate recorded at the end of 2015.
On a monthly basis house prices rose 0.8% to £205,898, up from £204,947 in November.
Nationwide said it expects house price growth to slow to around 2% next year as the economy weakens.
Low interest rates are expected to help underpin demand while a shortage of homes on the market will continue to provide support for house prices.
Robert Gardner, Nationwide’s chief economist, said: “The story of UK house price growth in 2016 was one of relative stability.
“Looking ahead to 2017, house price prospects will depend crucially on developments in the wider economy, around which there is a greater degree of uncertainty than usual.
“Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth.”
All regions saw house price growth in 2016, with East Anglia topping the table for the first time since 2010, with average prices up 10.1% for the year.
However, house price growth in London was lower than the UK average for the first time since 2008, with prices rising 3.7% over the year – down from 12.2% in 2015. This took the price of a typical home in the capital to £473,073.
The North was the weakest performing region, with prices changing little over the year by 0.1% to reach £124,284.
In cash terms, the gap in average prices between the South and the North continued to widen and now stands at over £170,000, around £11,500 higher than a year ago.
Howard Archer, chief economist at IHS Global Insight, said: “We believe the fundamentals for house buyers will progressively deteriorate during 2017 with consumers’ purchasing power weakening markedly and the labour market likely softening.
“Additionally, housing market activity is likely to be limited in 2017 by weaker consumer confidence and willingness to engage in major transactions.
“Housing market activity and prices are also likely to be pressurized by stretched house prices to earnings ratios and tighter checking of prospective mortgage borrowers by lenders.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “London clearly has suffered more in the price stakes than elsewhere in the country, a reverse of what we were seeing earlier in the year and for most of 2015. But for us it is the steep fall in number of transactions rand market accessibility, which remains a challenge particularly for first-time buyers, rather than the ups and downs of prices which is more important.
“The real test for the market will come in the early new year when we see whether continuing low mortgage rates and lack of new and existing housing supply prove more relevant than uncertainty over unemployment, inflation and the wider economy post-Brexit.”
