House prices are still on the rise
HOUSE prices across Britain forged ahead again in January, indicating the property market boom has not yet run out of steam. Nationwide, Britain's biggest building society, said the average price of a property rose by 0.2% during the month, building on December's 1.9% surge.
The annual rate of increase slipped from 13.8% to 11.7% because of the bigger rise in prices last December. The average price of a home is now £93,231. The society said although the market would slow during 2002, a collapse was not on the cards.
Property website Hometrack reported on Wednesday that house prices in London rose for the second month in a row in January after falling towards the end of last year.
'Despite pessimistic news from the global economy and the UK manufacturing sector, the housing market is holding up well,' said Nationwide's group economist Alex Bannister. 'The reasons are straightforward, with strong real take-home pay and the lowest mortgage rates for 40 years offsetting fears over increased job uncertainty.'
Nationwide stuck with its forecast that prices will rise by 6% this year. It played down fears that millions are taking on mortgages they cannot afford. Britain's mortgage debt stands at 86% of annual disposable income compared-with 65% during the late-1980s boom. But the average first year payment of a first-time buyer is only 26% of take-home pay compared with 50% 15 years ago.
'Although debt is higher than in the Eighties, it is also far more affordable,' Bannister said. He has calculated that the Bank of England would have to ramp up interest rates to at least 10% for borrowers to be so overstretched again.
Lenders also appear to have learnt the lessons of the past. The proportion of lending above 95% of the value of the property is currently half that of the late-1980s.
The good news on the housing market came as the Centre for Economics and Business Research, a respected think-tank, said property could be the best performing major asset for the foreseeable future.
CEBR chief executive Douglas McWilliams said the stock market was likely to generate an annual return of about 5%, but property promised between 6% and 7% because of a growing population and increased demand for homes.
