Strong finish to 2016 as house prices leap 1.7% to average £222,484

Updated: 

House price growth has delivered its biggest monthly rise since March, shrugging off Brexit uncertainty to finish 2016 with a flourish, a report said.

The Halifax House Price Index said property values jumped 1.7% between November and December, smashing economists' expectations of a 0.3% rise. 

House prices also rose 6.5% annually in December and stepped up 2.5% in the three months to the end of the year. 

Across the UK, the average property value was £222,484 last month.

Martin Ellis, Halifax's housing economist, said the housing market had delivered a strong finish to 2016, but a cocktail of pressures would have an effect on demand this year. 

"Slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017.

"Overall, annual house price growth nationally is most likely expected to slow to 1% to 4% by the end of 2017. The relatively wide range for the forecast reflects the higher-than- normal degree of uncertainty regarding the prospects for the UK economy this year."

The monthly price surge for December defies fears that Britain's vote to leave the European Union on June 23 would heap pressure on the housing market and cause prices to crash.

The index said the total number of homes sold last year would be in line with 2015 at around 1.2 million.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said despite the rebound in prices, the outlook for the housing market remained weak.

"The surge in house prices in December should not be read as a sign that the housing market is fizzing.

"Halifax's measure is much more volatile than others; it increased by more than 1% month to month in five months in 2016.

"The three-month average of the year-over-year growth rate is a much better guide to the underlying trend; it remains significantly weaker than before the referendum."

Focusing on individual towns and cities, the index found that Luton had notched up the biggest percentage rise in house prices last month. 

The average property value in the Bedfordshire town was 19.4% higher in December at £256,636 compared with last year. 

Howard Archer, chief UK and European economist at IHS Global Insight, said he still expects housing market activity and prices to come under pressure this year. 

"December's firming in house prices comes as housing market activity has picked up from the lows seen around last August - although it is hardly racing ahead.

"We believe the fundamentals for house-buyers will progressively deteriorate during 2017 with consumers' purchasing power weakening markedly and the labour market likely softening.

"Increasing economic uncertainty is also likely to weigh down on consumer confidence and willingness to engage in major transactions such as buying a house."