House prices rise by 5.9% in 2009, says Nationwide
UK house prices rose by 5.9% in 2009, making some recovery from the massive falls seen last year, the Nationwide building society has said.
The rise in prices seen this year compared with a sharp fall of 15.9% in 2008, the lender said.
The average cost of a home went up for the eighth months in a row in December, rising 0.4% to £162,103.
However, the Nationwide predicted that prices would change little over the coming year.
"This year's recovery has to some extent been driven by transitory factors and there are reasons to believe that it will lose momentum over the coming year," said Martin Gahbauer, the Nationwide's chief economist.
"At the same time, there is no obvious catalyst on the near-term horizon that would trigger significant renewed falls in prices, such as a sharp spike in interest rates."
Mr Gahbauer admitted that the past year's price increases had taken everyone by surprise.
"Few could have foreseen this development at the start of the year, when the near-term price trend was still pointing to a repeat of the double-digit annual decline experienced in 2008," he said.
"Although house prices are still 12.2% lower than their October 2007 cyclical peak, they have now rebounded by an impressive 8.9% since their February 2009 trough," he added.
The lender said price increases in the past few months had moderated compared with those in the summer.
The Nationwide argued that although interest rates were likely to remain low, which would help mortgage borrowers, there was still uncertainty about whether unemployment would rise much further and whether cash-rich buyers could continue to be a significant feature of the market.
As a result, it argued that the outlook for the coming year was unclear.
"At this stage, it seems likely that 2010 will see no significant house price movements in either direction," Mr Gahbauer said.
"However, the experience of 2009 demonstrates how unpredictable the market is at the current juncture and that one should always be prepared for the UK housing market to surprise."
Looking back at 2009, the Nationwide said there were clear reasons for the unexpected upturn in prices.
"The re-entry of cash rich buyers into the market coincided with an extremely low supply of property available for sale, as low interest rates limited the number of distressed sales and a significant number of home movers decided to offer their properties for rent rather than sale," Mr Gahbauer said.
"This restriction in supply meant that even a relatively modest pick-up in demand was able to put upward pressure on house prices."
Looking further back, the Nationwide said that the past decade was the strongest on record for house prices, despite the recession.
Property values have risen by 117% since the end of 1999.
Taking inflation into account, the average home increased by 68% in value over the decade, compared with a 14% fall in real terms in the 1990s.
Source: BBC News website.
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