Typical homeowner made more money in June from property than their job

The typical homeowner made more money in June from their property than they did by going to work, according to figures from Nationwide building society.

The average value of homessurged by 2.5 per cent to £108,818. The increase of £2,125 is equivalent to an annual salary of £25,500. The average wage is £23,607 a year.

The surge took the annual rate of house price increase to 21 per cent, the highest since 1989 when Britain was nearing the top of an unsustainable boom that was followed by a huge crash.

Nationwide said there was little sign that the current boom was ending, with properties for sale in short supply and low interest rates fuelling demand. The Bank of England decided yesterday to keep rates on hold at a 38-year low of 4 per cent, removing some fears that a rise in rates would unsettle the housing market.

Alex Bannister, Nationwide's group economist, said despite reports of declining demand for mortgages in June, there was little sign of that feeding through to a slowdown in the housing market.

"It is far from clear this is the beginning of a sustained downturn," he said.

"Survey and anecdotal evidence suggest severe shortages of property on estate agents' books, and sales are at their highest levels since 1989. Demand remains strong, driven largely by the favourable economic backdrop, and buyers appear to believe that rates will remain lower than in the past."

Mr Bannister added, however, that households were borrowing more to afford to get on to the housing ladder and urged lenders to maintain a "prudent" lending policy.

Nationwide also warned that property was unlikely to be immune to weak stock markets, and falling share prices were likely to dent people's confidence.

It said this was particularly the case in London, where the market for houses at the luxury end of the market had been "weakened significantly" by job cuts and falling bonuses in the City. "With unemployment up by 15,000 in London since its low point last July, we will be watching closely for any effect on the capital's market," Mr Bannister said.

Traders working for the banks in the Square Mile are already forecasting a crash that would echo the bust of the early 1990s.

According to bets placed with the spread-betting firm City Index, London house prices will peak in September and then slump by 11 per cent over the next 18 months.

House prices in the South-east will fall 9 per cent, while the average fall for England and Wales will be 8 per cent, according to the City Index trades.