Average home now costs ?157,900 as boom shows no sign of abating

The booming housing market is continuing to accelerate, with average prices up another 2.2% last month, the Halifax said yesterday. The increase added £3,400 to the typical value of a home and pushed the annual rate of house price growth over the 20% mark.

Yesterday's data confirms homebuyers are continuing to keep the faith despite speculation about a possible price crash, and provides fresh evidence that three interest rate increases since November have done nothing to halt the boom. Britain's biggest mortgage lender said high demand for homes combined with shortages of properties for sale were fuelling the property market's strong growth.

A typical home now costs £157,849, up from £154,444 a month ago and £129,586 12 months ago. At the end of 1999 the average price-tag was £81,595.

At 20.4%, the annual rate of house price growth is the highest it has been for a year. This figure has been rising steadily since December.

"Strong housing demand, together with supply shortages, have maintained house price inflation at a high level this year," the Halifax said. "The market has remained very strong in northern England and Wales in particular, and house price inflation in the south has picked up this year following a significant slowdown during 2003."

The Halifax expects the north and Wales to continue to outperform the rest of the country over the coming months, resulting in a further narrowing in the north-south divide.

But the lender believes the housing market will begin to slow later this year and into 2005. "The cumulative effect of the increases in interest rates since November alongside other potential increases this year should constrain housing demand. The increasing difficulties that face aspiring first-time buyers should also exert downward pressure on housing demand."

The number of first-time purchasers as a percentage of all homebuyers has dropped back to 28%, well below the long-term historical average of almost 50%.

Halifax's findings tally with rival lender Nationwide's latest data, which showed average prices up 1.9% in May, and annual price growth running at 19.5%. Some data has emerged which could point to a possible slowdown. In April, the number of mortgage approvals to fund house purchases was, on a seasonally adjusted basis, slightly lower than the average for the previous few months. But the Halifax said it would have to wait a few months to assess whether or not this represented the start of a slowdown.