30/05/2002

Nationwide reveal further rise in UK house prices

The latest survey from the Nationwide Building Society has revealed that British house prices rose in May to their highest annual rate in 13 years.

Overall, house prices rose by 2.1% during the month, taking their annual growth rate to 17.9% - the highest since the boom of the late 1980s.

Commenting on the figures Alex Bannister, Nationwide's group economist, said the boom showed few signs of running out of steam. He added: "There has been no slackening in the demand for property in May. UK property prices rose 2.1% in the month and annual house price inflation increased to 17.9% - the highest figure since 1989.

"The housing market is almost certainly going through a period when households are adjusting to low inflation and low mortgage rates. Certainly consumers appear willing to take on higher levels of mortgage debt even though their payments as a proportion of their pay will not erode as quickly as during the seventies and eighties.

"Long-term affordability relationships are changing which in turn may push house prices up stronger than cost of living inflation. Following this adjustment, house price growth should return to a more sustainable rate of between 4-5% per annum.

However, this period of adjustment may be protracted given the positive economic backdrop for borrowers and the considerable momentum in the market."

The number of completed house purchases rose by 27% year on year in May, the Nationwide said, and a corresponding surge in mortgage applications was seen as evidence that turnover will remain buoyant.

(MB)


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