For house and rental prices, the only way is up... and up, and up

Despite interest rates soaring higher than ever, with another raise expected, house price inflation picked up in April, pushing the price of an average UK home to £209,454.

The Department of Communities and Local Government said the month saw the cost of a typical home rise by 1.2 per cent, compared with a 0.8 per cent increase in April 2006.

Property prices propelled the annual rate of inflation up to 11.3 per cent, showing that there is still buoyancy in the market despite tentative signs elsewhere of a gradual cooling.

Northern Ireland continued to outperform the other home countries, with runaway house price inflation climbing to 54.1 per cent in April, up from 50.1 per cent in the previous month.

Year-on-year change in England and Scotland also increased, to 10 per cent and 17.8 per cent respectively, but fell back in Wales from 9.7 per cent in March to 9 per cent in April.

London continued to dominate the scene in England, with annual inflation of 14 per cent pushing the average price of a home in the capital above £320,000.

The typical house in England now costs £216,707, while in Northern Ireland prices have hit £228,208.

Prices in Wales and Scotland increased to £162,170 and £155,516 respectively in April.

Conditions for first-time buyers remain tougher than ever, with a monthly hike of 1.3 per cent.

The typical maiden buyer now faces a £159,977 price tag to get on the property ladder.

Howard Archer, chief UK and European economist at Global Insight, said more up-to-date figures indicated that house prices are now beginning to lose momentum.

He said: "It does appear overall that the housing market is starting to come off the boil as demand is increasingly pressurised by the rising affordability pressures stemming from higher interest rates, modest real disposable income growth and elevated house prices."

But the shortage of available properties is keeping prices high and pushing rents up for the fourth consecutive quarter.

The latest Association of Residential Letting Agents (Arla) survey found that on balance there was an increase in tenant demand and achievable rent levels in May.

More than two-thirds of prime central London agents reported rising rents, compared with around half of those in the rest of the South East and around a third of those outside the region.

Rental levels in the capital continued to increase largely as a result of a supply and demand imbalance.

Seven out of 10 letting agents in central London reported that there are now more tenants than properties - the highest proportion seen since the survey started six years ago.

The proportion of the rest of the country with a lack of supply also rose over the last quarter, according to the letting agents association.

Adrian Turner, chief executive of Arla, said: "There is a shortage of all forms of housing in the country and these results show that the shortage of good quality property is also apparent in the rented sector."

Despite the rising level of rent, the average yield for landlords was down slightly, from 5 per cent in February to 4.8 per cent in May for houses, and 5.1 per cent to 5 per cent for flats.

Arla said this is likely to be a reflection of continually rising house prices and mortgage costs during the quarter.

Tenants continue to stay in rental properties for an average of well over a year, according to the latest survey.

On average, letting agents said tenants remain in the same property for 15.5 months, a figure which is down slightly from the 15.8 months recorded in February.

Mr Turner added: "Even though it still needs more investment, the private rented sector is continuing to provide choice in housing and a safety valve for the housing market, particularly now, at a time of mixed expectations for future strong rises in house prices."