House shortage forces up prices
The increase in Nationwide's index was 0.7 per cent in February, about the same as the recent monthly average.
That took them to a level 8.5 per cent higher than a year earlier.
The average house price in the UK reached pounds 55,621, according to Nationwide, up from pounds 51,256 a year earlier.
House price inflation has now been running at above 8 per cent for four months, although the building society is forecasting a rise of 7 per cent for 1997 as a whole.
Paul Sanderson, head of research, said: "Survey evidence still strongly suggests shortages of property for sale remain a problem in many areas, causing upward pressure on prices in certain areas of the market and frustrating many potential buyers."
These shortages, rather than weaker demand or uncertainty ahead of the general election, probably explained why there had been tentative signs of a slowdown in housing market activity, he said.
Both building societies and banks have reported a small decline in the number of loans approved in January.
The British Bankers' Association (BBA), representing the main high street banks, said yesterday that the number fell from 32,234 in December to 31,637 in January. This was slightly larger than the normal seasonal decline.
While some economists are predicting house price inflation in double digits later this year as the economy continues to strengthen, others point to the few weaker figures as evidence that the housing recovery has reached a plateau.
For example, the Land Registry reported a decline in the number of property sales recorded by 34,000 to 230,198 in the final quarter of last year, in contrast to Inland Revenue statistics showing that the number of property transactions in December were a third higher than a year earlier.
However, Tim Sweeney, director-general of the BBA, said net mortgage lending strengthened "appreciably" in January.
"All told, the major banks' mortgage figures for the month provide support for the view that the early months of 1997 will see further sustainable recovery in housing market activity," he said.
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