House prices scale new heights but lender says some areas have hit their peak

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The Independent Online

House prices are poised to strengthen during early 2004 after another bumper month in December, with the exception of "cold spots" such as Ealing and Bexley, Nationwide Building Society said yesterday.

Home owners saw the value of their properties surge by 1.5 per cent last month, an acceleration from November's 1.2 per cent, the mortgage lender said. That made the average house worth just under £135,500, about £18,000 more expensive than at the start of the year.

The annual rate of increase was 15.6 per cent, which means the Nationwide's forecast of 9 per cent growth for 2004 would represent a marked slowdown. "We expect the regional growth differential to narrow as areas such as the North, Scotland and Wales see price growth slow," Alex Bannister, Nationwide's group economist, said.

Gosport, Hastings and Gravesham joined London boroughs such as Greenwich, Lewisham and Camden as the areas where prices were most likely to fall this year. Soaring property prices - beyond proportion to local neighbourhood characteristics - coupled with rising unemployment, made those areas the most vulnerable to a housing price slowdown, the Nationwide said.

Wandsworth, Hammersmith, Fulham, Lambeth and Waltham Forest, all singled out by the Nationwide 12 months ago as regions to watch, had experienced price falls during 2003, although Surrey Heath had fared worst across the country, with prices slipping some 9 per cent.

On average, prices had fallen by 2.5 per cent last year, which was "more widespread" than in 2002. Mr Bannister said the turnover of house sales in 2003 dropped to its lowest level since 1996, dragged down by a slump in the number of first-time home buyers.

He warned buyers not to take on too much debt. "The low number of first-time buyers is a sign that the market is cooling naturally. We would be concerned to see, as happened in the late Eighties, buyers taking on ever increasing amounts of debt in order get on to the property ladder," he added.

The biggest price increases of 2003 were recorded in Chesterfield, Derbyshire, where the average house value gained 56 per cent.

Price rises in London were more modest at 7 per cent, buoyed by a "relatively robust" final quarter as prospects improved for employment and bonuses, Mr Bannister said.

The Nationwide's forecast for 2004 chimes with the country's other main lender, the Halifax, which is predicting growth of 8 per cent. However, housing analysts have repeatedly failed to predict the strength of house prices over the past five years and both lenders have said prices might rise even higher.

Home owners in Carlisle, Stafford and North Lincolnshire joined those sleeping most soundly in Boston and Lancaster, with their areas tipped as the country's least vulnerable by the Nationwide.

House price growth of 30.1 per cent in the North and 26.1 per cent in Wales during the final quarter of the year helped the variation in regional growth rates to hit its greatest levels since 1990. The rises pushed average house prices in Wales, Yorkshire, Humberside and the North West above £100,000.