House Prices Continue to Rise
10th August 2013
Britain's largest building society, Nationwide, claim that the average completion price across any style of home, rose 0.8 per cent or £60 a day in July to £170,825. The average price of a house has risen by nearly 4 per cent since July last year and has soared 12 per cent since the lowest point of the recession.
Robert Gardner, Nationwide’s chief economist, said Government schemes such as Help to Buy and Funding for Lending, designed to make it easier and cheaper to borrow, were “boosting demand”. He warned the continuing shortage of new homes being built was adding to the pressure.
He went on to say: "The pick up in price is fairly gradual at this stage but mortgage availability is improving and cost of credit is low."
Experts have said that the rising cost of the property market is good news for homeowners and property developers, but the Government risked creating a ‘bubble’ of artificially high prices similar to before the credit crisis. The UK economist at the Royal Bank of Scotland, Ross Walker, said: “There is a risk we recreate past mistakes. If all the Government is trying to do is give a little nudge, the effects will be largely minimal. But if they’re saying ‘interest rates will be at record lows for some time and borrow as much as you can’, well that sounds very familiar”.
Business secretary Vince Cable voiced fears of another housing bubble last weekend, warning that the next phase of the Chancellor's £130 billion Help to Buy scheme; mortgage guarantees on house purchases up to £600,000, could "inflate the market".
He said: "We mustn't risk returning to the problems of the last decade when housing got out of control."
Prices for prime properties in central London are up almost 165 per cent since 2005. This is because wealthy overseas buyers are buying these properties as investments. Across the UK prices are just 10 per cent below the levels seen before the financial crisis erupted in 2007.
Nationwide reiterated again that we need far more new homes and construction activity is 40 per cent below the average completion rate in 2007. Mr Gardner said: "The fact the cost of renting a property has been consistently outstripping wage growth reinforces the notion that housing more generally remains in relative short supply."
Clodagh Garavan, Junior Broker at Evolution Warranties comments: “We continually hear the message repeated that not enough homes are being built to meet demand, we need some stability and a larger resource within planning departments to ensure planning consents are granted faster, otherwise the first time buyer will continue to be squeezed out of the market.”