Rightmove has revealed that house prices are rising twice as fast as they were in 2003.
This increase follows large rises of 2.0% in March and 4.1% in February. Asking prices in the capital are up by 7.2% since January, compared with a slight decline of minus 0.2% last year.
Boroughs in the west of the capital have been recording the largest rises in asking prices this month, with Hounslow up by 6.7%, Hammersmith & Fulham up by 6.4%, Ealing 4.7%, Kingston-upon-Thames up 4.2%, Hillingdon up 3.2%, and Kensington & Chelsea and Harrow, both up 2.6%.
Only six boroughs saw declining prices, with 24 seeing rises. Camden recorded the largest fall, of 1.7%.
The surge in house prices since the end of 2003 with Rightmove's April House Price Index showing asking prices up 2.8% this month, on top of increases of 2.9% in March and 2.1% in February.
The rate of house price inflation stands at 14.4%, up from a low of 9.1% in September 2003, while the average home is now worth 50% more than at the beginning of 2002, the date from which the Rightmove House Price Index is based.
Miles Shipside, commercial director of Rightmove, says: “The housing market is going with all guns blazing.
“Nationally, prices are far more buoyant than last year - in fact they are rising twice as fast. This is mainly because the markets in London and the South-East have bounced back. Combined with sustained strength in other parts of the country, the overall picture looks pretty strong. At this rate, prices could rise in 2004 by over 20%, more than twice the 9.6% that was recorded last year.”
The 2.8% rise this month takes average prices from £179,570 in early March to £184,582 in early April.
Shipman adds: “Since the beginning of the year, prices have risen by 8% or £13,647, from £170,935 in early January to £184,582 now. That means they're rising at the rate of £150 per day, which is tough for first time buyers trying to get onto the housing ladder.
“However, it's good for existing homeowners sitting on an asset that is steadily growing in value. If you invested in a high interest savings account paying 4.5% gross - 3.6% net after basic rate tax - you'd have to deposit more than a £1.5m to generate the same post-tax return.
“The average property is worth just under £185,000 - an eighth as much - so property is proving a much better investment at the moment.”
The annual rate of house price inflation, which had generally followed a downward trend throughout the first nine months of 2003, has steadily increased since December.
These renewed high levels of house price inflation beg the question as to whether the market is set for a crash.
Shipside continues: “Some commentators are suggesting that a sharp correction, similar to the one that occurred in the early 1990s, is now inevitable. Mistakenly, they look at the ratio of house prices to incomes and conclude that affordability of properties is becoming stretched and that prices will fall. What they need to look at is affordability of homes at current interest rate levels of around 5% or so.
“Clearly, a mortgage is much more affordable at 5% - or even a bit higher if the MPC decides to raise rates - than it was at between 10% and 15%, the levels that mortgage rates hit back at the beginning of the 1990s.
“Prices are being driven up by the availability of cheap borrowing as well as the shortage of stock on the market. It's partly that estate agents are looking for new instructions from prospective vendors, and partly that we have an acute structural shortage of accommodation in this country.
“The government is starting to address the property shortage issue by releasing more land for affordable housing, but as Kate Barker says in her review, new build is unlikely to be sufficient to resolve the basic lack of homes. These factors mean that while house price rises should cool off as interest rates rise and homes become more expensive, there's no likelihood of a collapse in prices. At the end of the day, we all need somewhere to live, and there aren't enough homes to go round.”
Rightmove continues to record growing levels of activity in the market, with numbers of new instructions and properties coming off the market steady growing. Properties coming on the market are currently averaging 110,000 per month, while those coming off are around 125,000. All parts of the country have seen rising asking prices this month, with much stronger increases away from the South-East corner of England.