House price growth at a 10-year low in 2005, says Halifax

House prices in Britain rose by 5% in 2005 - the lowest rate of growth for a decade - and an even smaller rise is anticipated this year, according to the Halifax.

The UK's biggest mortgage lender said the average home now cost £171,632 after a "modest recovery" late last year. Prices rose 1% in December, with similar increases in September and November. This pick-up caught the bank off-guard - a year ago it predicted prices would fall by 2%.

The Halifax said the 5.1% rise in prices last year was the smallest for 10 years and well below the long-term average of 8%. However, this UK-wide annual growth figure disguises wide regional variations. Scotland was 2005's house price winner with a 14.8% rise. It accounts for nine of the 20 UK locations with the biggest price increases. Other regions to see above-average rises include Northern Ireland (14.1%), the north of England (9.1%), Yorkshire and the Humber (8.4%), and the north-west (7.2%).

Two regions saw small falls in 2005: the south-west, where prices fell 1.9%, and East Anglia, where they slipped back 1%.

London proved more resilient than many had predicted, with prices up 6.7% - they only rose 3.9% in 2004. The average price in the capital passed £250,000 for the first time, ending 2005 at £257,120.

Strong jobs data, a rise in average earnings and the interest rate cut in August all contributed to the pick-up in the market, said the Halifax. But it did not anticipate prices accelerating in the coming months.

Martin Ellis, Halifax chief economist, predicted prices would be "flat" this year. He believes they will rise by 3% - broadly in line with inflation. He said: "Another year of below-trend economic growth and the continuing high level of house prices in relation to earnings ... should curb housing demand and prevent a renewed bout of high house price increases."

Howard Archer, of Global Insight, said the Halifax regularly reported larger rises than others but added: "It is clear there was some firming in house prices in the latter months of 2005 amid a marked pick-up in market activity and buyer interest."

He said that the threat of a sharp fall in house prices had receded and predicted they would rise by about 3% this year. The body representing Britain's estate agents was in buoyant mood yesterday, saying that 2006 was starting "on a high".

Christopher Hall, president of the National Association of Estate Agents, said: "Once again, a property crash was averted in 2005, despite forecasts at the beginning of the year from doom-mongers. Many of us predicted a slow but steady year, which 2005 indeed proved to be."

The organisation said its latest survey indicated "healthy sales" before and during Christmas. It believes prices will rise by 2% to 5% this year, and claimed the average house price would increase by "up to 100%" over the next 10 to 15 years.

Backstory

As ever, the experts cannot agree on how the housing market fared in 2005. The Halifax believes UK house prices rose by 5.1%. At the other end of the spectrum, the research group Hometrack reported a 1.6% fall. Nationwide said prices ended up 3%. When it comes to 2006 predictions, the Halifax is broadly in line with its rivals. It has forecast a 3% rise; the Nationwide predicts growth of 3% at best. Property website Rightmove has pencilled in 4%, while Hometrack has gone for an increase of "just over 1%".