UK housing market boom escalates

House prices surged by more than £100 a day during April, according to the UK's largest building society.

The Nationwide monthly house price index shows that annual house price inflation rose by 18.9 per cent, or £3,500, this month. House prices increased 2.1 per cent over the month, up from a 1.4 per cent increase in March.

Prices climbed fastest in the North, the Halifax states, with average property prices up by a third over the last year, compared with just 6.3 per cent in London.

The building society warns that the growing burden of debt on British consumers could lead to a "period of stagnation" in the housing market if prices continue to rise at current levels. The report also stresses that increased debt means that price growth is "unsustainable" in the medium term.

The price index also shows that the number of first-time buyers entering the market remains low, with just 359,000 buying their first home in 2003, compared with more than half a million in 2002. the current house price to earnings ratio is around 5.5.

Alex Bannister, group economist at Nationwide, said: "At a simplistic level, a move in the house price to earnings ratio back to its long term average would imply a fall in house prices of nearly a third, while a 1980s-style collapse would mean prices falling by around 50 per cent."