Nationwide optimistic for house prices in 2010

Nationwide has said that the rate of house prices could rise by as much as ten per cent this year.

Many homeowners struggling to sell their properties for rock bottom prices or living in negative equity may read the building society’s claim with disbelief but the company insist their recent surveys speak for themselves.

The findings indicate that the average UK house price rose by 1.2% in January, pushing the annual rate up to 8.6%. Following on from this the cost of the average UK home now stands at £163,481.

Martin Gahbauer, Nationwide's Chief Economist commented on the results: "House prices strengthened their upward momentum at the start of 2010, increasing by a seasonally adjusted 1.2% month-on-month in January."

Nationwide has admitted their surprise given the UK’s financial woes describing the current situation as “the deepest recession since the 1920s.”

The price rise can be attributed to the lack of property supply, at present it is not a seller’s market and many owners are biding their time to get a better deal from a buyer. Low interest rates are also a disincentive.

Gahbauer added: "People may have a need to move house but may be on a mortgage that has a very low rate of interest, say 2.5% for some standard variable rate deals."

Recent figures from HM Revenue & Customs (HMRC) showed that the number of homes sold in December jumped to a two-year high of 104,000 and there has certainly been a marked and steady improvement in the housing market since the spring of 2009.

Consequently annual house price inflation may move into double figures next month for the first time since May 2007.