Friday, February 27 2004

The latest Nationwide house price survey found that house prices rose by 3.1% in a month, which is the strongest monthly increase since April 2002.

This figure puts annual house price inflation up to 17.1% from 14.3% last month, and the price of the typical property up by £20,000 over the past 12 months.

These increases fly in the face of two interest rate rises in the past four months, an indicator that confidence in the outlook for housing is improving.

They are also a little surprising, says Nationwide, given affordability concerns, but probably reflects buoyant employment and a continued lack of property supply. The building society also warned that this rate was likely to slow by the end of 2004, due to lower income growth and higher interest rates.

Nationwide’s Group Economist Alex Bannister said: ‘Although economic conditions look unlikely to produce amore significant slowdown, additional housing taxes or hikes in existing housing taxes could knock confidence.’

He also expressed concern for the lack of first time buyers on the market, and called on the Government to make it easier for people to get on the property ladder, saying ‘Nationwide has called on the Government to abolish stamp duty on houses under £150,000.’ He also urged lenders and buyers to err on the side of caution because of the unsustainable nature of this growth.