House price rises confirm strong market
By Anna Fifield, Economics Reporter
Published: April 2 2004 12:58 | Last Updated: April 2 2004 19:53
news.ft.com
[just amazes me. wonder if pay increases are going up at the same rate? oh it must be all the money coming in with the easy immigration policy from Rumania -g- ]
The housing market's renewed strength was confirmed on Friday when both the Financial Times and Halifax indices showed prices kept rising during March.
Halifax said house prices grew by 18.5 per cent last month compared with a year earlier, the fastest annual rate since September, taking the average cost through the £150,000 mark to £151,467.
The figures - coming just after Nationwide reported annual price rises of 16.7 per cent and revised up its forecast for this year to 15 per cent - are likely to increase pressure on the Bank of England to raise interest rates next week.
"Strong demand and tight supply conditions continue to drive house prices up," said Martin Ellis, Halifax's chief economist. The acceleration was due to a 2.2 per cent rise in prices during the month.
The FT index, calculated by Acadametrics to foreshadow official Land Registry data, showed the annual rate was slightly more modest, rising to 15.1 per cent. This was because prices rose by only 0.4 per cent during the month, the slowest increase since May.
This implied that the Land Registry's quarterly figures would rise from the 12.5 per cent annual increase in the final three months of last year to about 14.5 per cent in the first quarter of 2004.
FT House Price Index
Click here
But the FT index, the first to record the market's second wind last year, showing a steady upward trend in the annual rate of inflation since August, now suggests the overheated sector might start to cool. "We expect the annual rate to remain strong in April and May but likely to fall, thereafter, as the strong monthly rises of last summer fall out of the index," said David Thorpe, of Acadametrics.
Although the Bank's monetary policy committee has been reiterating that it is targeting overall inflation in the economy, not house prices themselves, an increasing number of City economists say the committee will have to act to moderate domestic demand.
Malcolm Barr, at JP Morgan, said: "As much as the MPC does not wish to respond to house prices per se, it is difficult to argue against the fact that the ongoing strength of house prices, an improving labour market, and the absence of significant tax hikes in the Budget raise upside risks to the MPC's forecast for slowing consumption."
Don Smith, economist at Icap, the finance house, added: “I think it is significant that the MPC mentioned concerns about the housing market and consumer debt in March, when it left policy on hold, as one of the arguments in favour of raising rates. Were I Mervyn King [the Bank’s governor], I would seriously be considering the merits of a shock 50 basis point hike in rates at this meeting.”
Friday’s figures come after Nationwide, the country’s largest building society, reported price rises of 16.7 per cent over the year to March, prompting it to revise up its forecast for this year from 9 per cent to 15 per cent, the same as 2003.
In its regional breakdown, Halifax said Yorkshire and the Humber joined the rest of England in breaching the £100,000 average house price mark during the first quarter. But average prices remain below this in Scotland and Northern Ireland.
The Halifax figures showed that prices continued to rise most rapidly in northern England and Wales in the first quarter of 2004 - in the north-west by 9.7 per cent, the north by 9.4 per cent, Wales by 8.3 per cent, and Yorkshire and the Humber by 8.1 per cent.
The south continued to see the smallest price rises over the quarter, although the average price is much higher. Prices rose by 2.8 per cent in London compared with the previous quarter, while in the south-east they were 3.7 per cent higher and in the south-west up by 5.1 per cent.
"Regionally, the north still leads the way with the biggest price rises experienced in northern England and Wales in the first quarter,” Mr Ellis said.
“Prices are rising in the south, but have done so at a much more modest pace over the past year. This has led to a narrowing in the north/south divide and we expect this trend to continue during the remainder of 2004 as prices again rise more quickly in the north.”
www.acadametrics.co.uk |
