House prices surged further past the £100,000 mark last month, bolstered by low unemployment and cheap mortgages, figures from the country's largest mortgage lender showed yesterday.
The Halifax bank said the average price of a home rose by 0.4 per cent or £408 last month to £102,227.
Gary Styles, the head of group economics for Halifax, said: "The housing market has been very strong in recent months and the latest figures for March show further significant gains." But he pointed out that the latest rise was smaller than the average monthly increase since October of 2 per cent.
The annual rate of house price inflation also slowed – from February's 13-year high of 16.9 per cent – for the first time in seven months, prompting Mr Styles to predict that growth will slow further. "Our economic assessment is that house price inflation will ease over the course of this year as higher unemployment and weaker income growth reduces consumer confidence," he said.
Halifax believes prices will rise 7 per cent this year, up from its original estimate of 5 per cent – but that would still require a marked slowdown in the coming months.
Last year's predictions of slackening price rises were smashed as 2001 saw the fastest growth since 1988. Mr Styles said he was therefore cautious of declaring that a slowdown had begun, even though there had been a drop in the number of house sales.
"From our perspective, we would be quite encouraged to see the housing market slow," he said. "But this is only one month's figure, and I would want to wait for this month's figure or even May's."
Halifax said the main beneficiaries if prices slackened would be first-time buyers, who were continuing to find it hard to get on the property ladder, particularly in London and the South-east. Recent rises in interest rates to 4.5 per cent are likely to lead to a fall in demand.
The London market may also be undermined as falling rental levels curb the demand for homes as an investment to let out. The most recent Land Registry figures show the average price of a home in London fell more than £2,000 in the last three months of 2001.
Mr Styles said: "We expect that an easing in house price inflation in 2002, particularly in London, will provide some welcome help to first-time buyers."
But recent figures suggest that this may be wishful thinking. On Tuesday the Bank of England said the number of new mortgage approvals hit a three-year high of 115,000 in February. Over the weekend, Hometrack, a property website that surveys estate agents, doubled its forecast for this year to 12 from 6 per cent after reporting a 1.4 per cent jump in prices in March.
Nationwide, Britain's largest building society, will publish its March price-rise estimate today. Analysts in the City expect another strong reading of around 0.5 per cent.
Simon Rubinsohn, the chief economist at Gerrard, a City brokerage, said he believed low unemployment and cheap mortgage deals would keep the housing market pushing ahead.
"The fear that the labour market would see a significant shake-out has diminished," he said. "Jobs have been lost in manufacturing but have been more than offset by increasing employment in parts of the economy."Reuse content