UK house prices were up 6.5 per cent year-on-year in December – but growth is expected to dip in 2017.

According to the latest Halifax House Price Index, prices in the last three months of 2016 were up 2.5 per cent on the preceding quarter, but a drop in demand is predicted this year.

Martin Ellis, Halifax housing economist, said: “House prices finished 2016 strongly. The annual rate of growth increased, rising for the second consecutive month, from 6 per cent in November to 6.5 per cent.

Martin predicts demand will dip in the coming year, with smaller increases being a consequence.

He said: “Slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017.

“UK house prices should, however, continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates.

“Overall, annual house price growth nationally is most likely expected to slow to 1-4 per cent by the end of 2017. The relatively wide range for the forecast reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy this year.”