House price boom continues

Figures from the UK's largest mortgage bank Halifax show that the annual rate of house price inflation has hit 10.9%.

But despite the latest rise, the bank is sticking to its view that the global economic slowdown will begin to knock the housing market down over the next few months.

House prices in August rose by 1.5%, more than twice the 0.7% increase in July.

The Halifax suggests that low interest rates and strong consumer confidence is behind the latest surge in prices.

According to the bank, the average price of a UK house is now £94,101, compared with £85,768 at the beginning of the year.

Manufacturing troubles

But the Halifax also stressed the direction of the housing market could be about to change.

Martin Ellis, the group's economist, warned that there were increasing signs that manufacturing's problems were spreading to other sectors of the economy.

"This development is likely to impinge on home-buyers' confidence over the coming months, curbing housing demand and causing house price inflation to ease," he said.

In contrast, the Nationwide building society on Tuesday forecast that the slowdown would not kick in until next year.

Unsustainable?

The Nationwide has forecast a similar level of annual inflation to the Halifax, after it revised up its original estimate to 11% on Tuesday.

But Nationwide, which itself warned last month that "house prices are rising at an unsustainable rate," now believes the trend will not be reversed until next year.

The building society saw a much less significant rise in August house prices than the Halifax at just 0.4%.

Halifax attributed the disparity to the inclusion of the bank holiday weekend - a peak period for property sales - in its survey.

London surge

The continuing rise in house prices was also reflected in a results briefing on Wednesday from property firm Savills, which said that the market had "exceeded expectations".

The firm, which credited the rise to a surge in the number of buyers keen to exploit the rising market, noted particular demand for new homes in London.

"Demand has outstripped supply by a large factor for any development of quality," chairman Richard Jewson said.

The company, claiming brisker trade than last year, predicted the overall UK housing market would see further price rises.

"Whilst concerns in the stock market and general economy must sound a note of caution, there is as yet no sign that the residential markets are being adversely affected."