Annual house price rises broke into double digits for the first time in nearly three years during April, figures showed today.
The average cost of a UK home is now 10.5 per cent higher than it was in April 2009 at £167,802, the first time annual growth has reached double figures since June 2007, according to Nationwide.
But despite prices rising by a strong 1 per cent during April itself, economists warned that the 10.5 per cent figure may be the "high watermark" for house price inflation during 2010.
The recovery in the property market seen during the past year has been driven by the supply of homes for sale being unable to keep up with demand from potential buyers, forcing prices up.
However, recent survey evidence suggests that more properties are now coming on to the market, while buyer demand is showing signs of faltering.
Nationwide said it was unlikely that annual house price inflation would remain in double-digit territory during the coming months, adding that the latest figure had been boosted by the fact that April 2009 was a particularly weak month for house prices.
Martin Gahbauer, Nationwide's chief economist, said: "Given the very strong performance of house prices from May 2009 onwards, it will take monthly increases in excess of 1 per cent for the annual rate of inflation to be maintained in double digits."
The group also pointed out that the quarterly rate of growth, which is considered to be a smoother indicator of market trends, was continuing to decline.
The rate dropped to 1 per cent during the three months to the end of April, down from 1.5 per cent in the three months to the end of March, making it the seventh consecutive month during which it has fallen.
Ed Stansfield, chief property economist at Capital Economics, said: "With the pressure on household incomes more likely to rise than ease, and surveys pointing to a new mood of caution amongst buyers, house price inflation may now have reached its high watermark for the year."
Recent figures from the British Bankers' Association showed that the number of mortgages approved for house purchase recovered only slightly during March, after falling sharply in January, due to people buying lower value properties rushing through transactions to beat the end of the stamp duty holiday.
Economists said the subdued level of mortgage approvals seen during the first quarter of the year suggested that the housing market recovery may have lost momentum.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "While house prices have firmed anew after dipping in February, it still remains highly questionable whether they can make significant further gains over the coming months.
"Housing market activity appears to have lost some momentum overall so far in 2010, the economic fundamentals are still far from robust for the housing market, credit conditions are still pretty tight.
"Meanwhile, more properties are coming on to the market, thereby moving the supply/demand balance more in favour of buyers."
He expects house prices to be "erratic" during the coming months, and flat overall for the rest of the year.Reuse content