The gap between house price growth in London and the rest of the UK looks set to narrow in 2016 following several years when the capital raced ahead of other regions.

The Nationwide Building Society house price index for December saw house prices nationally increase 4.5 per cent, up from 3.7 per cent in November.

House prices in 2016 are predicted to grow 3 to 6 per cent nationally.

Average annual house prices in London for the fourth quarter of 2015 were up 12.2 per cent on the previous year, rising from 10.6 per cent in the third quarter.

Nationwide calculates average prices in the capital are 50 per cent above their 2007 pre-financial crisis peak, compared with 7 per cent for the UK as a whole.

However, Nationwide said that “with affordability metrics in the capital stretched by historic standards, another year of above-average price gains appears unlikely”.

The report 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.”

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

The Nationwide report said there was a strong correlation between house prices and the growth in employment.

“Regions with higher rates of employment growth have seen significantly stronger rates of house price appreciation. The gain in employment in London is particularly striking, with the number of people in employment up 14 per cent compared to the pre-crisis period,” it said.

“It remains an open question whether the striking divergence in regional house price performance evident in recent years will be maintained in 2016.”

London was the strongest performing region for the fifth year running, with average prices up 12 per cent year-on-year. The neighbouring Outer Metropolitan region took second place, with prices up almost 11 per cent compared with the fourth quarter of 2014. Yorkshire and Humberside was the weakest performing English region, with prices up 0.4 per cent year on year.

Five UK regions recorded a slowdown in the annual rate of growth, while seven saw acceleration. Most parts of the country continued to see annual house price gains — the exception was Scotland, which recorded a small decline.

Meanwhile, Land Registry figures published on Wednesday for the year to the end of November show average annual prices in England and Wales up 5.6 per cent. Monthly house prices were up 0.4 per cent since October 2015.

London prices were up 11.2 per cent in November compared with a year earlier.

The government agency, which collects data on property ownership for England and Wales, said the number of completed sales in September was down 8 per cent on a year earlier, although the number of £1m-plus houses sold in the month was up 1 per cent.

The number of repossessions in England and Wales fell from 733 in September 2014 to 406 this September.