House price average £322,000 and rising

THE average price of a local market house has soared to a record high of £322,859. And the bleak news for islanders is that the cost of property is set to continue rising, according to one of the leading estate agents.

Policy and Research Unit figures for the end of the third quarter reveal that the all-time high is a 3.5% rise over the previous three months and a 7% increase on the preceding 12.

This means that house prices have risen by more than 250% in a decade - the local market average stood at £124,674 at the end of the third quarter in 1996.

Policy Council strategic adviser Andrew Birnie said the latest figures reflect that 'the market is still fairly buoyant', with a higher number of property transactions than in previous quarters.

The last time the number of transactions was higher than the 293 of the third quarter was 321 during one part of 2002.

'There is an oversupply of flats/apartments and the price rise is likely to be more on houses, reflecting the demand,' he said.

Estate agent Swoffers director Spencer Noyon said in-house figures indicated the market had seen a rise of about 8% over the past 12 months.

'I think it's a fair reflection of a shortage of good-quality housing at this time, which is fuelling prices.

'We don't see this situation getting any better. The biggest problem is there is very little land available for new development, particularly in the rural area,' he said.

'As a direct consequence, when houses come up people are fighting to secure them, which is pushing the price up.

'While supply is as low as it is at the moment, we don't see this situation changing, unfortunately.

'There are no real winners because even if you can sell at a high price you still have to buy at a high price, unless you are leaving the island,' he said.

'While supply is short there is only one direction prices will go - up.'

Islanders will have to wait and see whether last week's hike in the base interest rate to 5% will have any effect in dampening the local housing market.

In the UK, mortgage lenders have been warned by City watchdog the Financial Services Authority to ensure that they could cope with the consequences of any housing slump when offering loans of up to five times salary.

'This may help first-time buyers ?bridge the gap? but it exposes them to greater risk should the market falter and prices drop,' said Mr Birnie.

'If the gap between earnings and house prices widens then it will make it increasingly difficult for first-time buyers to get on the property ladder.

'We will not know until the 2007 second-quarter figures are available whether prices have peaked due to the seasonality effect.

'We also need to bear in mind that it may be that there were some higher-price properties transacted last quarter, which would have helped to raise the average,' he said.

Mr Noyon admitted that it was dangerous to take one quarter's figures in isolation.

He knew of a couple of top-end local market sales during the third quarter which would have had an impact.