January sees fastest rate of rise in house prices: Nationwide

January sees fastest rate of rise in house prices: Nationwide

	Published : Tue, 31 Jan 2006 12:55 By : Amy Watts Print this Story

LONDON: House prices rose at their fastest monthly rate in 18 months in January, Nationwide building society reported Tuesday. This is further evidence that the property market is picking up, it said, pointing out that the average price of a home rose 1.4 per cent to 158,478 pounds, with the year-on-year rise at 4.4 percent, also fastest since last May.

Nationwide's group economist Fionnula Earley said this the strongest monthly rate of growth since July 2004 when it was 1.9 per cent and the annual rate of house price inflation was more than 20 per cent. "The annual rate of house price inflation in January 2006 is a more modest 4.4 per cent. Even so, this is a significant increase in price and confirms the strengthening trend we have seen since October."

The pick-up in the average house price is for the seventh month, the mortgage lender said, and this is clear enough sign that property market activity is set to accelerate further.

It said the pick up since October reflects a release of some pent-up demand following the cut in interest rates in August, and the increased confidence among buyers and sellers as they became more comfortable that the market was heading for a soft landing.

In spite of the encouraging show, Nationwide is apprehensive whether the pick-up would continue when economic growth is set to be below the long-run average unemployment is likely to rise and affordability remains stretched. Said Earley: "It is unlikely that the market could absorb another strong rally of house price inflation."

She said, in addition there are indications that consumers' appetite for unsecured debt is diminishing and that the amount of extra borrowing against property has slowed.

Nationwide, however, predicted that house prices will rise by between 0 and 3 per cent in 2006.

Other surveys have indicated a steady increase in house prices and turnover. Property website Hometrack said yesterday that home values rose for a second consecutive month in January, although only by 0.1%, while mortgage lender HBOS said prices gained for the sixth month in seven in December, rising 1 per cent.