House prices inflation continue upward move

UK house price inflation increased in September, according to latest figures from the Department of Communities & Local Government (DCLG).

Prices rose by 0.8% in September. This brings the annual rate of house price inflation up from 7.7% to 8%. The average UK property now costs £198,552, compared to £197,631 in August.

While the rate of house price inflation rose in England, Scotland and Wales, it fell slightly in Northern Ireland.

The strongest growth spurt was in Wales, where annual house price inflation rose from 7% to 10.3%. In England, the rate went up from 6.6% to 7.2%. The inflation rate also edged up in Scotland, from 12.7% to 12.9%.

The annual house price inflation rate fell from 26.6% to 23.6% in Northern Ireland, which has seen very strong growth during the rest of the year.

The buoyant London market continues to lead the way in England, with annual house price inflation hitting 9%.

Expectations exceeded

Strong economic growth and a shortage of supply meant that annual house price inflation in 2006 has exceeded most analysts’ expectations.

Although the Bank of England raised the interest rates a quarter point to 5%, many analysts think this won’t dampen the housing market.

Howard Archer, chief UK economist at Global Insight, said: "Current elevated mortgage activity and a shortage of supply in many areas (especially London and the South East) means that house prices could well see further significant increases in the near term,"

But over the long term Mr Archer added that he expected house price inflation to cool, due to the fact that property is becoming unaffordable to many.

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