02 Sep Property prices rise at fastest rate since 2007
Britain’s housing market is at its strongest for six years, with an accelerating recovery blowing away the traditional August slowdown. The authoritative Hometrack monthly survey has found prices have risen 0.4 per cent in August against 0.3 per cent in July – with the South East showing signs of a possible bubble.
London prices have surged 0.9 per cent in the last month, with the South East climbing 0.5 per cent. And the trend is poised to continue with a 1.1 per cent increase in demand outpacing a 0.8 per cent rise in supply. Sellers are now achieving 94.6 per cent of their asking price, and the average sale time has fallen to just two months.
The mismatch between supply and demand is much more marked in the traditional hotspots of London and the South East. In total a third of the country’s post codes saw rises in price, the highest level recorded since May 2007. Hometrack expects this to accelerate, further stoking price rises, thanks to the release of “six years of pent-up demand”, created after the market was thrown into reverse by the financial crisis.
The research says low mortgage rates and an improving economic outlook are the drivers for the recovery.
The trend of rising prices could yet cause concern for new Bank of England Governor Mark Carney, whose monetary policy committee holds its monthly interest rate-setting meeting on Wednesday.
Mr Carney has vowed to hold rates for three years at their current historically low levels, unless there is a sharp spike in infla-tion.
However, some City analysts reckon the Bank could be forced to move sooner as signs of economic recovery appear to be increasing.
An influential group of economists linked to the Institute of Economic Affairs yesterday attacked Mr Carney’s “misguided forward guidance” policy, telling the Sunday Times it would delay necessary rate rises and was a “flawed model” that risks “accelerating inflation or worsening boom-bust cycles”.
Hometrack said: “The balance of supply and demand recorded by the survey leads house prices by three months and is an indicator of future changes.
“Overall we expect demand to continue to expand over the remainder of the year so long as the outlook for the economy and mortgage rate remain unchanged. A lack of housing for sale is set to remain a feature of the market and this will keep an upward pressure on prices in the near term.”
Hometrack’s figures follow on from data from the Bank of England last week showing mortgage approvals for house purchases had jumped to 60,624 in July from 58,238. While that is low when compared to the 90,000 a month typically seen prior to the financial crisis, approvals are at the highest level seen since then.