House prices rose at their fastest rate for nearly six-and-a-half years during the first quarter as demand from potential buyers remained strong, figures showed today.
The average cost of a home was 8.7 per cent higher in the three months to the end of March than it had been in the same period of 2013, the highest rate of annual growth since October 2007, according to Halifax.
Stephen Noakes, mortgages director at Halifax
Stephen Noakes, mortgages director at Halifax, said: “Housing demand continues to be supported by an improving economic outlook, growth in employment, rising consumer confidence and low interest rates.”
But on a monthly basis prices dipped slightly, falling by 1.1 per cent during March to leave the average property costing £178,249.
The fall followed particularly strong growth seen during February, when prices jumped by 2.5 per cent.
Halifax also stressed that monthly changes could be volatile.
It added that March’s blip was only the third monthly decline recorded during the past 15 months.
When price changes are looked at on the more reliable quarterly basis, values rose by 2.3 per cent during the three month to the end of March, compared with the previous three months, the biggest quarterly jump since January 2010.
Halifax said prices were being driven up by a combination of strong demand from potential buyers and a lack of supply.
But the group said the imbalance was showing some signs of easing, with the number of new homes that developers started to build in England rising by 24 per cent during 2013 compared with a year earlier.
Mr Noakes added: “The recent strengthening in house prices is increasing the amount of equity that many homeowners have in their home.
“This will potentially encourage and enable more owners to put their property on the market for sale over the coming year, therefore boosting supply and easing pressure on prices.”
Today’s figures come after Nationwide said prices rose for the fifthteenth consecutive month during March, rising by 9.5 per cent on an annual basis.
The recent run of positive data on the housing market has caused fears in some quarters that a bubble could be developing in the market.
But figures from the Bank of England showed that mortgage approvals for house purchase actually fell by 8 per cent during February.
A further short-term dip in mortgage lending is anticipated as lenders get to grips with the new rules under the Mortgage Market Review, which comes into force later this month.
The monthly fall reported by Halifax for March should act to further ease concerns that a runaway market is developing.
Matthew Pointon, property economist at Capital Economics, said: “The stable growth in house prices is consistent with other indicators suggesting that while the housing market is continuing to recover it is not, at least at the national level, accelerating out of control.
“The most likely scenario is for house prices to make further steady gains over the coming year.
“But, at least outside central London, the conditions are not in place for prices to accelerate towards boom-like conditions.”
