House Prices Enjoy Strongest Rise In Two Years

Green Shoots? House Prices Record Strong Jump
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House prices have recorded their strongest monthly jump in nearly two years, the Nationwide said on Thursday.

The 0.6% rise is the highest since a 1.3% month-on-month increase in April 2010, bolstering indications that the economy is not quite as weak as has been feared, the building society said.

The typical house price reached £162,712 in February, a figure 0.9% higher than the same period last year.

Bank of England figures yesterday showed that mortgage approvals for house purchase have reached a 25-month high, although analysts have put the surge down to first-time buyers rushing to buy before the end of a stamp duty holiday.

The two-year concession is due to end on March 24 and lenders fear it could be followed by a dip in housing market activity.

Analysts have also suggested that house prices have been holding up due to the lack of homes being put on the market, helping to create "pent up" buyer demand.

Robert Gardner, chief economist for Nationwide, said: "Evidence that house prices picked up a little in February follows a series of data releases suggesting that economic conditions may not be quite as weak as feared after the UK economy contracted in the final quarter of 2011.

"Surveys of activity in the manufacturing and service sectors point to a rebound in January, while consumer confidence and retail spending were both stronger than expected during the month."

February's house price rise reverses a 0.3% monthly house price drop recorded by Nationwide in January and is the first month-on-month increase since last November.

Gardner said: "It remains to be seen whether this trend will be sustained. Given the still challenging economic backdrop this increase in housing market activity may be the result of a temporary rise in first-time buyers entering the market to take advantage of the stamp duty holiday before it expires in March.

"If so, this may continue to support activity and prices in the near term before cooling over summer."

In its lobbying ahead of Chancellor George Osborne's Budget later this month, the Council of Mortgage Lenders (CML) said yesterday that its experience suggested there was unlikely to be a sharp bounce-back in housing market activity.

The CML, whose members are banks, building societies and other lenders, doubted the wisdom of reintroducing the 1% stamp duty rate for first-time buyers on properties worth between £125,000 and £250,000.

It said: "We are now likely to see an unhelpful bunching of activity prior to the concession's expiry, followed by a dip."

Property analysts said figures showing a similar rise from the Land Registry could be a sign the market is back on the up.