London house prices up 12.2% in fourth quarter but growth set to cool in 2016, says Nationwide

The explosive growth in London house prices picked up again in the last three months, but prospective home buyers have reason to hope costs may moderate in 2016, according to Nationwide.

The building society's December house price index showed that prices in the capital and the South of England continued to outpace the rest of the country by "a wide margin".

In the fourth quarter of 2015, London prices grew by 12.2%, an acceleration from the previous quarter's rate of 10.6%.

The spurt puts the average price of a home at £456,229, 50% more than their worth at the pre-crisis peak, according to the data.

The brakes may come on next year, however, said Robert Gardner, Nationwide's chief economist.

"With affordability metrics in the Capital stretched by historic standards, another year of above-average price gains appears unlikely."

Across the rest of the country, house prices were up by 0.8% in December, or 4.5% annually.

The average cost of a home in Britain was £196,999.

Unlike in London, the pace of growth is expected to quicken.

Gardner said: "As we look ahead to 2016, the risks are skewed towards a modest acceleration in house price growth, at least at the national level, despite the likelihood of interest rate increases from the middle of next year."

"Further healthy gains in employment and rising wages are likely to bolster buyer sentiment, while borrowing costs are expected to rise only gradually.

"However, the main concern is that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability."

"Overall, we expect UK house prices to rise by 3-6% over the next twelve months."