House prices rose by 2.1 per cent in April, taking the average price of a home to £145,918, according to the Nationwide monthly house price index.
The annual increase now stands at 18.9 per cent and prices are rising at more than £100 a day.
However, group economist Alex Bannister warned that the pace of growth would slow over the medium term and forecasted a 15 per cent rise over the year.
Bannister says: “The number of market house purchase approvals remained high at 117,000 in February, suggesting activity in the housing market will remain strong over the summer. However, as was the case throughout 2003, when just 359,000 first-time buyers managed to get on to the property ladder, the number of new entrants remained low. Just 28,000 bought in February and we expect only 350,000 to enter the market in 2004 as a whole.”
Bannister says instead it was existing homeowners, many with large amounts of equity, who continued to sustain the market by trading between themselves. He says price growth at the lower end of the market would be difficult to sustain without a resurgence in first-time buyers.
Bannister also predicted that the market would cool in the second half of the year, with a total increase of 15 per cent in 2004. The rise reflected buyers taking on higher levels of debt in response to lower interest rate and he urged borrowers to take a “prudent approach” to the amount of debt they take on.