House price bubble set to burst

BRITAIN'S biggest mortgage lender today predicted that the housing market bubble will burst by the end of the year as it unveiled another punchy increase in property values during April.

Halifax said the average price of a home rose by 0.7% to £102,851 last month following a 0.4% gain in March. But the year-on-year rate of increase dropped to 15.1% from 16% the previous month.

Gary Styles, the bank's head of group economics, said: 'The housing market has been very strong in recent months and the latest figures for April show further significant gains. Our economic assessment, however, is that house price inflation will ease over the course of this year as weaker income growth and higher unemployment reduces consumer confidence.'

The Halifax assessment is at odds with other reports suggesting the housing boom is gaining momentum. Earlier this week, Nationwide reported that house prices soared by a record 3.4% in April and withdrew its warning that the upsurge is unsustainable.

According to Nationwide's calculations, the extraordinary April figures mean that prices have risen by 16.5% in a year and by 90% since the housing market started to recover from the early-Nineties crash six years ago.

Price monitoring company Hometrack said prices across England and Wales leapt by 1.8% after shooting up by 1.4% in March, taking gains so far this year to more than 5%. Hometrack's housing economist John Wriglesworth said there were no signs of a slowdown and predicted the boom would continue for the rest of the year.

Disagreement between Halifax and Nationwide is nothing new. Six months ago, Nationwide said house prices were rising at the fastest rate since the 1980s boom, and in the same month Halifax said they were at a standstill. Over time, the discrepancies were eliminated.

But the conflicting interpretations of the housing market are an embarrassment for the two lenders and complicate the task of the Bank of England's monetary policy committee in setting interest rates.

Styles said would be first-time buyers were finding it difficult to secure property in many parts of the country as shortages and high prices were preventing them from getting on to the property ladder. But he said the expected easing in house price inflation during the course of the year should make it easier for them to buy their first home.