Annual house price growth picked pace in the UK during January 2018 to reach 3.2 per cent as against 2.6 per cent registered in December 2017. This 0.6 per cent month-on-month increase came as a surprise, as the market had softened towards 2017 end.

According to latest Nationwide House Price Index, the average price of homes was £211,756 last month.

“The acceleration in annual house price growth is a little surprising, given signs of softening in the household sector in recent months. Retail sales were relatively soft over the Christmas period, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll,” Nationwide said.

One of the reasons for the increase in houses prices is the lack of supply – estate agents reporting fewer homes entering the market. Similarly, the subdued pace of building activity evident in recent years is likely to provide ongoing support for house prices.

How the housing market performs in the year ahead will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to foresee. Nationwide expects the UK economy to grow at modest pace, with annual growth of 1 per cent to 1.5 per cent in 2018 and 2019, and it is bound to impact the housing market.