Failure of a housing market downturn to materialise has spurred more households to trade-up for larger properties rather than encourage first-time buyers, says the Royal Institution of Chartered Surveyors.
Commenting on figures released today by the Department for Communities and Local Government, showing that house prices rose 5.1% in March, up from a recent low of 1.6% last October, it says the buoyant market in 2006 is fuelling demand for larger properties rather than entry level properties.
Milan Khatri, chief economist at RICS, says: “The pace of house price inflation on the government’s official measure has rebounded, rising to the highest pace since May 2005 as housing demand has strengthened since last August’s interest rate cut.
“The DCLG figures are based upon 45,000 completed property purchases per month from about 50 mortgage lenders.
“The upturn in UK house price inflation has been led by homes purchased by existing owners, rising at an annual pace of 5.2% in April compared to 4.9% for first-time buyer properties.
“This is the first time that properties of former occupiers have led the market since October 2004.
“House price rises continue to be strongest in northern England, Scotland and Northern Ireland.
“However, for the latest month, there has been a strong upturn in London, where house price rises hit 7.1% in April, having shown a drop of 0.9% last October.
“The acceleration in house price rises in London reflects the buoyancy of the financial and business sector in the capital, but if recent stock market volatility is sustained, it is likely to have some cooling impact on the market later this year.
“Despite a fall in the number of mortgage approvals in April, which are viewed as a forward indicator of housing demand, activity remains above the historical average and still point to firm demand conditions.”