Halifax: house price growth is at two-year high

Britain's biggest mortgage lender yesterday ruled out the chances of a new property boom despite releasing figures showing that house prices rose at their fastest rate for two years in April.

Halifax said the start of the traditional spring house-buying season coincided with a 2% jump in the value of the average home as the upward trend in the market seen since last summer gathered momentum. It warned, however, that it expected rising unemployment and higher taxes to take the edge off demand, and predicted an easing of house-price growth in the second half of the year from the current annual rate of 9.9%.

John Butler, UK economist at HSBC, noted that the 4.5% rise over the past three months on the Halifax measure translated into an annualised rate of 18%.

"At face value that is not stability, that is the type of pace associated with a boom," said Mr Butler, although he noted that other measures of house prices, such as Nationwide's, did not imply the same strength. Nationwide, which uses a different method for assessing the strength of the housing market, reported last week that house prices rose by just 0.1% in April.

Martin Ellis, chief economist at Halifax, said housing market activity had been improving in recent months, with sales at the bank's estate agents 15% higher in the first quarter of 2006 than in the same period of 2005. He added, however, that the year-on-year increase in house-price inflation was flattered by comparison with last year, when prices were falling. "Whilst the market may remain relatively buoyant over the coming few months, we expect the recent softening in the labour market and the continuing high level of house prices in relation to earnings to curb demand. Alongside higher utility and council tax bills, these factors should lead house price growth to moderate in the second half of 2006."

Halifax said that Scotland was the UK's property hotspot in the first three months of 2006, accounting for six of the 10 biggest price rises. Cupar in Fife saw the largest rise - a 36% jump in average house prices from £117,552 to £159,332.

Separate data from the Bank of England yesterday suggested that the pick up in demand for homes could have levelled out. Seasonally-adjusted mortgage approvals in March stood at 116,000, only slightly higher than February's 114,000.

The Royal Institution of Chartered Surveyors - the body that represents estate agents - said housing demand was up 27.5% on last year.