House prices to rise 15% in 2004 - Nationwide

Property prices are seeing a resurgence and are now expected to rise an average 15% this year or at least 10% in the capital, suggests the latest house price update from Nationwide.

Quarterly data presented by the building society says the annual house price started high for the first three months of this year and should remain so across the rest of the year, as the average property price is now around £142,584.

In particular, house prices rose 1.4% in March and lifted the quarterly house price index by more than 5% in Q1 2004 says Nationwide’s group economist Alex Bannister, while properties in Wales rose by an average 36% in 2003 alone.

Previous predictions set by Nationwide suggested house prices would rise by an average 9% in 2004, however, that figure has now been improved in even the worst performing regions of the UK and a property slump is now thought to be unlikely.

Moreover, London property prices are beginning to see an improvement since the end of the year – even though prices rose by less than 1% over Q2 and Q3 2003 – as a stronger economy and private sector bonuses should help to lift residential values by around 10%, says Bannister.

"We remain confident that price growth will moderate during 2004 in response to higher interest rates - we expect base rates to reach 4.75% by the end of the year," says Bannister.

"In addition, a downgrading of expectations for future house price growth will also weigh on the market. However, the stronger than expected start to the year has led us to revise up our forecast for house price growth to 15% from 9%."

Bannister continues: "London property prices are now expected to grow at around 10%, with increases of over 20% foreseen in the North, Wales and North West. The rest of the UK will be clustered around 15%.”

Banister says while the housing sector had thought the buy-to-let market might eventually cool, there is so far no lack of interest, rather the main difficulty now is lack of new builds and suitable property.