House prices are expected to stay strong and rise by an average of 7% this year, according to the...
House prices are expected to stay strong and rise by an average of 7% this year, according to the latest house price figures issued by Nationwide Building Society.
Seasonally adjusted UK average house prices rose by 0.8% in April while annual house price inflation moderated to 6.6%, suggesting that the housing market may still be on track as many economists had predicted earlier this year.
Discussion has begun in the industry as to whether there is likely to be a recession within the housing sector again this year, given the uncertainty of global economic stability.
However, figures released by Nationwide suggest house prices will continue to climb steadily, and inflation has moderated compared with last year.
Alex Bannister, Nationwide's group economist, says:
"Average house prices rose by 0.8% in April, illustrating the healthy and stable conditions that now prevail in the UK housing market. Annual house price inflation moderated to 6.6% - that is prices rose 6.6% in the 12 months to May 2000 to April 2001 - compared to the 17.5% annual rate recorded at this time last year. Despite an expected weakening in the economy the market remains on course to achieve our forecast of a 7% rise in house prices this year."
Information supplied by Nationwide suggests house prices have risen over the last 50 years by a staggering 4,500% from around £1,900 in 1952 to the current average price of around £86,244.
This does not mean that the market will overheat, according to Nationwide, on the contrary, house prices still remain 10% short of the level reached at the height of the 1980s housing boom.
According to Bannister, the impact of the slowing US economy, stock market uncertainty and the continuing impact of foot and mouth are likely to reduce income growth this year and offset any boost from falling mortgage rates.
"We therefore feel confident that the rise in house prices for 2001 will match our 7% forecast. Obviously, conditions in the US and the state of the equity markets could deteriorate further and this would point to a more pronounced UK slowdown. In this environment, our forecast would inevitably prove too optimistic," says Bannister.
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