UK house prices hit a new record high

UK house prices hit a new record high in August, driven by soaring demand across London and south east England, official figures show. The Office for National Statistics (ONS) recorded an increase of 3.8% in the 12 months to August 2013, up from a 3.3% rise in the 12 months to July 2013.

The housing market recovery is being felt in every region apart from Scotland, according to official Government figures.

It measured growth as being stable across most of the UK – with a year-on-year increase of 4.1% for England over the period being driven largely by growth in London.

There was annual growth of 1.1% measured for Northern Ireland, 1% for Wales though a fall of 0.7% was recorded in Scotland.

It left the average property price in the UK at £247,000, the ONS said, meaning its measure surpassed a previous peak recorded in January 2008.

While growth in London and the South East continued to drive the record performance for house prices, the pace of growth eased slightly over the month – possibly because of the summer holidays.

The housing market is expected to see the heat of demand from would-be buyers turned up further over the coming months, following the launch of the Government’s new Help to Buy scheme, which offers state-backed mortgages to people with deposits as low as 5%.

RBS, NatWest, Halifax and Bank of Scotland started offering loans under the initiative last week and have reported strong interest so far, while more lenders including HSBC, Barclays and Santander have also confirmed their plans to come on board.

Some sharp increases in property prices in recent months have fuelled fears that the country could be heading for a property “bubble”, with the new phase of Help to Buy pushing up demand for homes at a time when the number of properties for sale is in relatively short supply.

Howard Archer, chief European and UK economist for IHS Global Insight, said: “While the strength of house price rises in London is becoming an increasing concern and pushing up the overall national increase in house prices, we are currently a long way off from an overall housing market bubble emerging.”

A Treasury spokesman said of the figures: “We’re encouraged to see signs that house prices are recovering from a low base alongside the wider economy.

“However, the Government understands that the housing and mortgage markets are yet to return to their long run levels, leaving too many people – especially first-time buyers – struggling to afford historically high level of deposits.

“That’s why the Help to Buy mortgage guarantee is a vital tool to give young people the same opportunity to get a foot on the property ladder as previous generations.”

Campbell Robb, chief executive of Shelter, warned that the Government’s efforts to kick-start the market could actually result in properties being pushed further out of some people’s reach as house prices increase.

He said: “Our rollercoaster housing market may make headlines, but these days rising house prices don’t have the feel-good factor, and for good reason.

“Nobody wants a return to the bad old days of house prices rising then crashing,” he concluded.