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Mini property boom sees UK residential prices rise by £10,000 in six months

Prices rose by 1.6% in September with the average value of a home in the UK put at £163,533, the figures from the Halifax show.

But prices are still a long way behind the peak of the market in August 2007 when the average reached £199,612.

These figures follow last week’s index from Nationwide which put UK house prices at the same level as September 2008, and reported the average price of home was £161,816.
A lack of property on the market is driving the mini property boom but economists are warning the market could yet prove to be volatile going into the traditionally quieter winter months.
‘Continuing increases in unemployment and low earnings growth are likely to constrain the rise in demand.’ said Martin Ellis, Halifax housing economist.

But he added; ‘There are also some signs that the improvement in market conditions is encouraging more people to put their properties up for sale.

This development could loosen market conditions by alleviating the current shortage of supply and curb the pace of house price growth evident in recent months.’
Seema Shah, a property economist at Capital Economics, said that recent price gains could be reversed in due course.

‘Currently, prices are being driven up by a shortage of property for sale. However, this can only be a temporary support.

With unemployment set to rise further and the market still overvalued, in our view, the correction is far from over,’ Shah said.

And rating agency Fitch said that that house prices in Britain would fall by around 30% in total from the October 2007 peak, indicating that they have a further 17% left to fall.

‘Despite the fact that a global economic recovery is under way, the economic fundamentals do not augur well for a sustained strong recovery in the UK housing market,’ said Alastair Bigley at Fitch.

He also warned that recent signs of easing in credit availability were only likely to be temporary.

It said that as unemployment continued to rise, the rates of mortgage arrears and repossessions could rise, which would in turn prompt mortgage lenders to tighten lending criteria.