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Buoyant Picture Nationwide

HOUSE PRICES ROSE during January at their fastest rate for 18 months, according to figures which also suggest Scotland’s property market will continue to outstrip the rest of the UK.

The lender Nationwide reported the average cost of a home in Britain jumped by 1.4 per cent during the month to an average £158,478 - well above the previous month’s 0.5 per cent rise. Monthly growth figures have not been this high since July 2004, when prices increased by 1.9 per cent and annual house price inflation was running at more than 20 per cent.

January’s strong rise helped boost annual house price growth to 4.4 per cent, the highest rate since May last year. But experts said the overall market remained fragile and that the recent increases reflected caution by consumers who were borrowing in order to invest in property rather than spend money.

Fionnuala Earley, Nationwide’s group economist, said annual growth in Scotland during 2006 was expected to be between 2-5 per cent - higher than the UK average forecast of between 0-3 per cent.

“Scotland’s overall strong economic performance has meant less cooling off, so growth forecasts remain strong. We expect growth in Scotland to peak during the middle of 2006 and then ease off towards the end of the year., she reckoned. “The UK housing market got off to a strong start in 2006, with prices increasing by 1.4 per cent in January. The annual rate of house-price inflation in January 2006 is a more modest 4.4 per cent. Even so, this is a significant increase in price and confirms the strengthening trend we have seen since October.”

She added that three-quarters of the 4.4 per cent rise in house prices since January last year had come during the past four months.

Nationwide maintained that at least part of the pick-up since October reflected the release of some pent-up demand following August’s cut in interest rates, as well as increased confidence on the part of buyers that the market was heading for a soft landing. It said the continued increase in mortgage approvals suggested the market would strengthen further over the coming few months.