Official: House prices up 12%

OFFICIAL figures have revealed that the UK property boom has gathered pace. Annual house price inflation rose to 12.2% May, the fastest increase since August 2003 and up from 10% in April, according to the Office of the Deputy Prime Minister.

The price of the average home rose from £168,600 to £170,719. London, regarded as a leading indicator for the national market, saw a bounce back. Prices were up 12.2% on a year earlier compared with 7.9% in April and 4.9% in March.

The national figures confirm signals from earlier surveys by lenders Halifax and Nationwide that rising interest rates failed to curb demand for property in May.

However, more recent studies have pointed to a cooling market. Last week, Halifax said prices increased by 1.2% in June, the smallest gain since last November and below the average monthly rise of 2.1% in the last six months.

The Government figures also revealed more woe for first-time buyers with the average price up 20.7% from a year earlier at £138,273. The annual rise was an increase from 18.3% in April.

Wales was the top performing country with an increase of 27.5% followed by Scotland at 25.3%, Northern Ireland at 13.8% and England at 11%.

Within England, rises were highest in the North East (28.3%) and North West (22.5%), and lowest in the South East (3.8%).

The Bank of England kept the base rate on hold last week despite Governor Mervyn King expressing concern about the property market. Economists expect rates to rise again in August. They have been hiked from 3.5% to 4.5% since last November.

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