Property boom promises end to negative equity

Fresh confirmation of the meteoric rise in property prices came yesterday as the Halifax Building Society released figures showing the average value of homes rose by 1 per cent in March.

The increase brings the total rise in prices over the past 12 months to 7.2 per cent, up from just 1.7 per cent in March last year.

However, the Halifax yesterday moved to dampen suggestions of an Eighties- style boom by pointing out that prices are still 4.2 per cent below their peak in May 1989.

"Though we again confirm that the market is continuing to recover, this is still at only a moderate pace, with no indication of the boom conditions of the late Eighties," a Halifax spokesman said.

The society added that the most recent transaction figures for the number of homes bought in England and Wales showed a decline of 4.1 per cent in February, compared with the previous month.

Halifax's figure, up from 0.6 per cent in February, comes days after a separate survey by its rival, Nationwide, whose own index showed prices in March rose by 1.6 per cent. The difference in both sets of figures is attributable to differences in the way statistics are collated and analysed. Over longer periods, both societies show similar results.

Nationwide's own survey also showed that the increase in prices is concentrated in London and south-east England, which is now showing double-digit increases over the past 12 months, more in some areas.

The Halifax said the driving factor forcing house prices upwards is the shortage of properties coming on the market, as sellers hang on to the last minute before contacting an estate agent. Potential buyers are being forced to compete for the few attractive homes that are put up for sale.

The rises look set to bring to a rapid end one phenomenon of the housing market collapse - negative equity, where the cost of a mortgage is greater than the value of a home.

A survey by Woolwich Building Society in January showed that the number of people with negative equity dropped by 650,000, to 405,000 at the end of 1996. Experts believe that if prices continue to rise as at present, the remaining number could be all but wiped out.

However, signs of some cooling in the market came yesterday from Legal & General, whose separate survey of moving intentions, showed the number of people who said they were likely to change homes in the past six months has fallen, from 26 per cent to 17 per cent.

Neville Walton, L&G's director of financial services, said: "Activity is constrained by the threat of increases in interest rates, by uncertainties caused by the general election and the public viewing houses less as an investment ... and more simply as a home to live in."