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Last Updated: Monday, 9 January 2006, 09:11 GMT
'Modest recovery' in house prices
People looking in an estate agents window
The Halifax predicts prices will rise by 3% in 2006
UK house prices rose by 2.1% in the final three months of 2005, confirming a "modest recovery" in the latter part of the year, the Halifax has said.

During December house prices rose by 1%, the bank said. This meant prices increased by 5.1% over the whole year - the smallest annual rise for 10 years.

The Halifax added that the average UK house price now stood at 171,632.

However, the housing market is expected to be "flat" this year, the Halifax said, with prices set to rise by 3%.

Housing demand curbed

Halifax chief economist Martin Ellis said the recent rise in prices was "entirely consistent with the improvement noted by all the main indicators of housing market activity over recent months".

Data from the Bank of England has shown the number of mortgage approvals rising in recent months, and surveys from the Royal Institution of Chartered Surveyors have also shown rises in the number of new buyer enquiries.

The most recent survey from the Nationwide building society also saw a pick up in prices, with values up 0.5% in December and 1.3% in the final quarter of 2005.

Rising employment levels and the Bank of England's rate cut in August had helped to underpin the market in recent months, Mr Ellis said.

Despite the recent pick up in the market, the 5.1% rise in prices over 2005 was "significantly" below the long-term annual average of 8%, the Halifax said.

The annual rate of house price inflation fell in all regions in 2005, except in London where it rose to 6.7% compared with 3.9% in 2004.

"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 in 2006," Mr Ellis said.

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