House prices set to soar - Britain

House prices in Britain could rise by up to 12% during 2002 as strong demand continues to fuel the booming property market, it was claimed today.

Property website hometrack said prices in England and Wales soared by 1.6% during March, raising the average cost of a house to £120,900 (€197,000).

The jump follows an increase of 1.4% in February, and has caused the group to increase its forecast for house price inflation for 2002 to 12% from 8%.

Hometrack said it had seen a surge in the number of people looking to buy a house during March, with the number of potential buyers rising by more than 50% since the beginning of the year.

It said this could not simply be explained by seasonal factors, but indicated renewed confidence in the market with first-time buyers keen to get on to the property ladder before prices became unaffordable.

Demand for properties is continuing to outstrip supply, particularly in London and the South East, and this is contributing to further price rises.

John Wriglesworth, hometrack’s housing economist, said: ‘‘With all measures of affordability still well below previous peaks, helped by interest rates remaining at an all time low, and significant excess demand prevailing in the market, there seems to be little prospect of house price rises moderating, at least in the short-term.

‘‘Price rises are now fuelling expectations of further house price rises which in turn is raising demand.

‘‘There is now a real danger of a speculative and escalating price spiral occurring in the market.’’

Price increases were seen in all counties in England and Wales, with Devon and North Lincolnshire reporting the biggest rise of 2.9%, while prices jumped 2.8% in Teesside and Wiltshire.

Only two counties had increases of less than 0.5%, and these were Merseyside where prices crept up 0.2%, and Cheshire where they edged ahead 0.3%.

During March sellers got an average of 96.5% of their original asking price, the highest level for more than 12 months, and well up on January’s figure of 94.7%.