Property prices in England and Wales rose by 0.4 per cent for the second month in a row during the four weeks to October 20, offsetting price falls seen earlier in the year.

The cost of a house is now 0.7 per cent higher than it was at the beginning of 2003 and property web site Hometrack said it expects prices to end the year two per cent higher as the market continues to recover in the run up to Christmas.

John Wriglesworth, Hometrack's housing economist, said: "The housing market is heading for new heights. There is no doubt that the year is finishing with new house price highs.

"Expectations of rising interest rates are having very little adverse effect on housing demand.

"Provided interest rate rises are modest - less than one per cent - the health of the housing market should remain robust."

He added that the group expected modest rises to continue during 2004, with the cost of property increasing by four per cent during the year.

The strongest price rises continued to be in northern regions and the Midlands.

Hereford and Worcester led the way with a 1.6 per cent jump, followed by the East Riding of Yorkshire at 1.4 per cent and South Lincolnshire at 1.3 per cent.

Only three areas registered a fall in prices, with the average cost of a home dropping by 0.5 per cent in North West London, 0.2 per cent in Buckinghamshire and 0.1 per cent in Northumberland.

Overall price rises were highest in more affordable regions, with prices averaging £114,790 in the ten regions which saw the biggest increases, compared with an average of £187,080 in the ten places with the lowest rises or price falls.

A seven per cent rise in the number of sales agreed during the month, following a two per cent increase in September, also provided evidence that the market was reviving.

The percentage of their asking price sellers achieved increased during October for the fourth month in a row, rising to 95.1 per cent from 94.7 per cent.

Monday October 27, 2003