House prices have surged by another 2 per cent this month to take the value of the average home to an all-time record, a survey shows today that will fuel fears of a return to "bubble" conditions.
Home sellers have raised the asking price for their property by £4,155 between April and May amid mounting evidence of a return of boom conditions in the housing market, Rightmove said. In London, average prices have broken the £300,000 barrier, the property website said.
The annual rate leapt from 4.1 per cent in April to 5.9 per cent, meaning that prices have to increase only 1.3 per cent for the remaining seven months of the year to reach 8 per cent.
"House prices are exceeding all expectations," said Miles Shipside, its commercial director. He raised Rightmove's forecast to 8 from 5 per cent.
The annual rate of house price inflation was already running at double the rate expected for the whole year by industry at the start of 2006.
"Demand is a lot more buoyant overall than at this time last year, so a rise of up to 10 per cent in the faster moving regions such as parts of London and the South could be on the cards this year," Mr Shipside said.
The report adds to speculation that the Bank of England will be forced to respond with a rise in interest rates, possibly as soon as next month. Last week Mervyn King, its Governor, said that at current levels prices seemed "remarkably high relative to those measures that put it into context".
Two years ago, when annual house price inflation was above 20 per cent, the Council of Mortgage Lenders took the unusual step of calling for a pre-emptive rate rise to prevent an unsustainable price bubble building up.
The CML said it was not planning a similar warning in the current cycle as it believed the market would slow. It stuck to its forecasts for growth of just 2 per cent both this year and in 2007, implying a marked slowdown in the second half of the year.
Halifax and Nationwide, the two largest mortgage lenders, believe rising energy and fuel costs and council tax bills will sap households' incomes, while a weakening labour market will discourage new buyers.
The current mini-boom in prices is being driven by a sharp rise in housing transactions. Figures from the Land Registry last week showed sales were up almost 40 per cent in the year to March.
New figures from Your Move estate agents showed demand to date this year was 25 per cent higher than in 2005. Both the ratio of new buyers to properties on the market and the number of viewings per property have shot up.
The ITEM Club economic model run by Ernst & Young said today that the housing market had "shrugged off its winter blues".Reuse content