Rise in house prices hits double figures for first time since crunch

Jonathan Prynn, Consumer Business Editor
29 Apr 2010

House prices are surging at more than 10 per cent a year for the first time since the peak of the property boom.

The average British home was 10.5 per cent more expensive this month than a year previously, at £167,802, says the latest survey from the Nationwide. The last time price rises were measured in double digits was in June 2007, when the market was topping out just before the credit crunch and savage economic downturn that followed.

A one per cent rise in April means that property has got more expensive in every month except two since the Bank of England dropped interest rates to a record 0.5 per cent in March last year.

The strength of recovery has astonished property experts and is likely to be even more dramatic in London where demand has been strongest but homes for sale are in shortest supply.

Homebuilder Taylor Wimpey today said that prices soared by nine per cent in the first four months of the year with demand for expensive homes, many in London, particularly strong.

The latest rise leaves prices exactly 10 per cent below the peak of the market, although values in parts of central London are already above those recorded in the summer and autumn of 2007.

However, property experts warned that the post-recession bounce may now have run its course, with the market likely to “flatline” over the rest of the year.

Nationwide's's chief economist Martin Gahbauer said: “While the recovery in new buyer inquiries at estate agent offices appears to have petered out, the last few months have seen an increase in the level of new instructions from sellers.

“All else being equal, this should lead to a gradual flattening out of the recent price momentum.” Tim Hammond, of property search experts The Buying Agents, said the frenzied London market would calm down after the election.

He said: “At the moment we are seeing a lot of sealed bids from buyers on the few highly desirably properties on the market. We're also likely to see over the coming months plenty of remorse from buyers who regret being pushed into buying a property they didn't really want.

“Hopefully, once the general election is behind us, a semblance of certainty and normality will return to the market, and we may start to see a market that is operating not on fear, but on the true value of a property and what a buyer is prepared to pay.”