2nd August 2013
The recovery in the UK housing market is showing no signs of abating as prices are up by almost 4 per cent over the past 12 months, marking the strongest growth rate in three years writes Philip Scott
According to the latest numbers from Nationwide, UK house prices increased by 0.8 per cent last month and are 3.9 per cent higher than July 2012, taking the average house price to £170,825.
The figures show that house prices are presently some 12 per cent higher than the lows seen in the midst of the financial crisis, though they are still around 10 per cent below the all-time highs recorded in late 2007.
Commenting on the figures, Robert Gardner, Nationwide’s chief economist, says: “Signs of a modest improvement in wider economic conditions and further modest gains in employment are likely to be lifting buyer sentiment. An improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures such as the Funding for Lending and Help to Buy schemes, are also boosting the demand for homes.”
Supply constraints are helping to drive prices up as building activity is still subdued. In the first three months of the year, housing completions in England were down 8 per cent compared to the same period last year and around 40 per cent below the average number of quarterly completions in 2007.
Gardner adds: “The fact that rental growth has been consistently outstripping wage growth reinforces the notion that housing more generally remains in relative short supply.”
Howard Archer, chief UK & European economist at consultancy, IHS Global Insight expects house prices to see solid gains over the rest of 2013 but doubts that they will race ahead given extended very low earnings growth and still relatively limited housing market activity compared to long-term norms.
He says: “While an improving housing market is helpful to growth prospects, it is vitally important for stability and longer-term growth prospects that a new housing price bubble does not emerge. Consequently, should the housing market gain substantial momentum over the coming months, the case for dropping the ‘Help to Buy’ mortgage guarantee scheme that is due to start in 2014 will strengthen, even if the government may find this politically difficult to do
Official figures show the UK is continuing to pull itself out of the doldrums as the economy expanded by 0.6 per cent in the three months to June, twice the 0.3 per cent recorded for the previous three months.