Increases in house price growth

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Increases in house price growth

LONDON, UK - House price growth in the UK increased in December but 'there are clear signs' that the market will cool off in 2004, according to the latest survey.

The Halifax's latest house price survey showed that prices increased by 1.8 per cent in December to take the annual house price inflation to 15.4 per cent. In November prices increased by 1.1 per cent and the annual house price stood at 14.1 per cent.

The Halifax warned that despite the increase, they expect house price growth to slow down naturally as the impact of higher interest rates and a reduction in the number of first time buyers entering the market continues to kick-in.

Shane O'Riordain, general manager of Group economics at the Halifax, commented: 'We anticipate that UK bank base rates will increase during 2004 and will end the year at around 4.50%. Assuming a base rate of 4.50%, mortgage payments will still be very affordable and will represent approximately 16% of gross earnings - still well below the long-term average of 21%.'

The bank expects that the shortage of affordable housing stock to extend to beyond London and the Southeast impacting further on the number of first time buyers entering the market.

The Halifax stated that 2003 was the 'Year of the North' where house prices increased by 33.7 per cent, which was over twice the average UK rate of 15.4 per cent.

House prices in the North have now risen by almost 60 per cent in total during the last two years, a rate of house price growth which the bank claims is 'clearly unsustainable'. In the south, annual house price gains during 2003 have been; East Anglia 14.6 per cent, Greater London 8.6 per cent, the South West 6.7 per cent and the South East 5.8 per cent.

The Halifax expects that the house price gap that has been narrowing between the North and South of the country during 2003 will to continue to narrow during the coming year, before re-establishing itself in 2005.

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