UK Property does the Unexpected in 2012

House prices in the UK continue to defy economic expectations, the latest data from LSL Property Services reveals.

It shows that last month property prices rose 0.2% to £220,385 –  although they lost 0.5% in value over the year.

London is leading the resistance with property values now 3.1% higher than last year.

Wales also saw annual house price growth – although other places in the UK did not fare so well.

David Newnes, director of LSL Property Services, said: “The final month of 2011 saw a modest rise in prices, which rounded off a year of economic turmoil in which the property market showed remarkable resilience.

“Despite the growing fears of a debt crisis in the euro zone, prices rose 0.7% in the second half of 2011 and, with high inflation and reasonably static prices, this has helped make property more and more affordable.

“While transactions fell slightly in 2011 compared to 2010, the last five months of 2011 all saw higher activity than 2010, boosted by the increasing number of buyers eager to make the most of the affordable – if hard to obtain – mortgage finance coming onto the market.

“But despite prices showing such astonishing staying power, 2012 is set to be another tough year. With the global economy in a parlous state, the size of mortgage advances, which rose in the last 12 months by 3.5%, could begin to decline.

“The stamp duty holiday for first-time buyers will end in April which means first-time buyers will have to stump up an extra £2200. This is likely to create a rush in the first part of this year at the lower end of the market as buyers scramble to avoid the purchase tax – after that, we could see first-time buyer activity fall sharply.

“The Government's mortgage insurance scheme, which aims to boost the supply of mortgage finance to first-time buyers, will provide some help for those trying to get their foot on the ladder, but it's unlikely it can offset the impact of the end of the tax holiday.”