House prices jump again to new six year high

Latest report suggests that housing demand is still strong

House prices have surged to a new record level with the biggest monthly rise since 2002, but signs of a housebuilding revival could soon start to slow down the upward trend, according to Halifax.

It follows the figures from Nationwide earlier this week which also showed record rises despite what Nationwide's chief economist Robert Gardner described as "tentative signs" that activity in the housing market "may be starting to moderate".

The Halifax figures show that house prices in the last three months were two per cent higher than in the previous three, and 8.7 per cent higher than the same period last year.

This makes the average house price in the UK now £184,464, similar to the Nationwide's estimate and the highest figure since October 2007, although other price indices based on different ways of collecting data suggest the average is much higher. Zoopla estimates that the average home in England is £263,987.

Average prices increased by 3.9 per cent in May, though these figures can be volatile and less reliable than the quarterly ones. The surge follows two consecutive months of price falls.

Stephen Noakes, Halifax Mortgages Director, said that housing demand is still strong and was being supported by an ongoing economic recovery. But he added that there are signs of a revival in housebuilding which "should bring supply and demand into better balance and curb upwards pressure on prices over the medium and longer term."

Brian Murphy, Head of Lending at Mortgage Advice Bureau, said that the annual house price increase of 8.7 per cent wasgood news for second-steppers looking to climb the property ladder.

"Measured growth in house prices is good news," he said, "as it demonstrates the housing market is on its way to making a healthy recovery and prevents buyers from being stuck in an equity trap."

However, he added that London prices were skewering the figures and house price growth in the rest of the country is "far more subdued" with government data showing prices around much of the UK are still lower than they were pre-crisis.

The Bank of England is expected to intervene to put controls on property lending soon, although its figures showed that the number of mortgages approved in April fell for the third month in a row. Llloyds and Royal Bank of Scotland have already put curbs on customers asking to borrow four times their income on loans above £500,000.

The Royal  Institution of Chartered Surveyors reported that the average number of homes sold per chartered surveyor hit its highest level since February 2008 in April.

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