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Annual house price growth continues to rise

19th December 2006 | back to article listings BACK    print this article PRINT

Homeowners received an early Christmas present this year without even having to grapple with wrapping paper – house prices rose at an annual rate of 9.7 per cent in November, up from 8.7 per cent in October, according to the Assetz House Price Watch.

This means that the average house price now stands just £1,853 below the £200,000 threshold, with annual growth having accelerated by 5.5 percentage points since the beginning of the year.

Such strong figures, coupled with the continuing shortage in supply, has caused property investment specialists Assetz to predict annual growth of between eight and ten per cent throughout the next 12 months.

Commenting on the figures, Stuart Law, managing director of Assetz, said that 2008 could "quite possibly" see a repeat of this booming house price inflation, "even allowing for the slight possibility of an additional interest rate rise in the spring".

He explained: "The growing demand for homes, driven by high immigration and the forthcoming expansion of the EU to include such countries as Bulgaria, Poland and Romania, will be the main source of this growth.

"While the Government is moving in the right direction by introducing PPS3 planning legislation to help increase the output of new homes, this is unlikely to check house price rises in the next few years."

The country's hot property market has been led by spiralling prices in the capital, a phenomenon that is likely to be fuelled by the latest round of City 'fat cat' bonuses.

The Centre for Economic and Business Research reports that bonuses will grow by 18 per cent this winter, amounting to £8.8 billion, with just over 4,000 workers earning in excess of £1 million.

Mr Law predicted that this would lead to "meteoric growth" in central London in 2007.

"Prestigious locations such as Mayfair and Belgravia are likely to become the scene for bidding wars between cash buyers from the UK and overseas and have the potential to double in price over the next ten years," he said.

There could be further good news in store for UK homeowners as we move into the new year. Assetz noted that as two members of the Bank of England's monetary policy committee voted against the latest rise, the bank may refrain from raising rates again in the near future.

The investment specialist stated: "The sudden admission by the Bank of England that the inflation risk is a lot lower than they had previously suggested confirms the Assetz view that five per cent is quite possibly the top of this cycle in rates."

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