Annual house price inflation could be as much as 8% this year - its highest level since March 2005 - according to the latest Halifax House Price Index.
The lender says house prices rose by 2% in April and that the increase last month has taken house prices up by 4.4% for the first four months of 2006.
Average house prices now stand at £178,992 Halifax says.
While the housing market appears to be hotting up Halifax cautions it is likely that house prices will cool in the second half of this year. It says the increases in recent months are partly attributable to “technical factors” such as the poor levels of growth seen in the corresponding months of last year. It says that this will unwind later in the year effectively taking the “heat” out the market. The growth in house prices has also been tempered by a steadier increase in housing market activity with Halifax Estate Agents reporting a sixth consecutive monthly increase in sales agreed – up 15% than in the same period last year.
Meanwhile Halifax says the market is still supported by a resilient economy, high levels of employment and low interest rates.
Martin Ellis, chief economist at Halifax, says while the market may remain relatively buoyant over the coming months he expects a “softening” in the labour market and the fact that higher house prices are still outstripping wage inflation to curb demand. “Alongside higher utility and council tax bills, these factors should lead house prices growth to moderate in the second half of 2006,” he adds.
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