House prices still rising as economy rebounds

Click to follow
The Independent Online

Every part of England and Wales recorded a rise in house prices last month, according to a survey today showing that the housing market has far from run out of steam.

Every part of England and Wales recorded a rise in house prices last month, according to a survey today showing that the housing market has far from run out of steam.

The price of the average home rose 0.9 per cent in February, the largest increase since October 2000, the property website Hometrack said. The report will increase fears that interest rates will have to rise again - possibly as soon as this week - and was echoed by upbeat surveys showing the economy is rebounding.

All 52 counties reported price rises, the highest increases being in the Isle of Wight (2.5 per cent) and Cumbria (1.7 per cent). No city had a fall, with the biggest rises of 2.2 per cent in Bath, Lancaster and Liverpool.

Strong rises in southern countries and towns point to a reversal of 2003's north-south divide that saw prices in once-cheap northern areas surge while growth in London and the South-east was muted.

The number of new buyers increased at more than twice the rate of new properties, pointing to further house price rises to come.

"The housing market continues to strengthen," said John Wriglesworth, Hometrack's housing economist. He said mortgages were still cheap by historical standards, lenders continued to relax their criteria and buyers were happy to pay more.

"Provided the Government is not stupid enough to raise stamp duty in this year's Budget, house prices will continue to rise strongly," he said, dismissing speculation of a housing market crash.

Meanwhile research to be published this week shows London will propel the UK out of its economic downturn of the past three years and into the strongest boom since the late 1990s.

The latest estimates by the Centre for Economics and Business Research seen by The Independent show the capital's economy growing by 3.4 per cent next year and by 3.7 per cent in 2006. Separate surveys said business activity and cashflow were at their highest for years.

The Bank of England's monetary policy committee (MPC) meets this week to decide whether to follow last month's quarter-point interest rate rise with another hike to prevent inflation getting out control.

Most economists in the City believe the MPC will sit on its hands, saying it has made clear it plans to move "gradually" for fear of creating a financial crisis for heavily indebted households that could trigger a property crash.

George Buckley, a UK economist at Deutsche Bank, said that the next rise would come in May, when the Bank published its latest forecasts.

But some are having last-minute doubts. Richard Jeffrey at Bridgewell Securities said last week's upward revision to growth estimates showed that the economy was running out of spare capacity.

"It does not necessarily follow that rates will rise at the start of March but the probability of an increase on the 4th has undoubtedly risen," he said.

Comments