UK house price growth continued to gain momentum last month, rising by 0.3% compared with the previous month and taking annual price growth to 1.9%. It means that the typical price of a home is now £168,941, according to the latest index from the Nationwide Building Society. The data reveals that the southern regions of England, especially London, continued to record stronger rates of house price growth.
Robert Gardner, chief economist at the Nationwide, said it is the fastest pace of growth since September 2010. ‘A number of factors are likely to be contributing to the recent acceleration. Demand for homes has been supported by further modest gains in employment, as well as 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 Scheme,’ he explained.
‘Signs of a modest improvement in wider economic conditions may also be playing a role in boosting buyer sentiment. At the same time, there are few signs that the supply of housing is improving significantly. Indeed, construction data points to a further decline in building activity in recent quarters from already depressed levels,’ he said. ‘For example, in the first quarter of 2013 housing completions in England were down 8% compared to the same period of 2012 and around 40% below the average number of quarterly completions in 2007,’ he added.
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The gradual pick up in house price growth at the national level masks significant regional variation with the strongest performing regions in the south of England, especially London. Indeed, house prices in the south of England were up 3% year on year in the second quarter, more than twice the 1.4% pace recorded across the UK as a whole in the three months to the end of June. Moreover, in London prices were up by 5.2% year on year, taking the price of a typical home in the capital to an all time high of £318,214 and almost twice the level prevailing in the rest of the UK when London is excluded.
The gap between house prices in London and the rest of the UK is the widest it’s ever been, both in cash and percentage terms. Gardner said that this divergence in house price performance across the regions has been evident for some time, and, as a result, prices in the south of England are now closer to their pre crisis level than most other parts of the UK.
In the UK as a whole, house prices are still around 9% below their pre crisis peak. By contrast, London house prices reached a new all time high, 5% above their pre crisis level. House prices in England are currently 5% lower than their 2007 peak, while they are 13% lower in Wales, 12% Scotland and 53% lower in Northern Ireland.
According to Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB), home owners will be delighted to see a third month of house price increases. ‘Potential buyers will be comforted by the fact that mortgage rates are still heading in the opposite direction. As property becomes more desirable by the week, falling fixed rates mean they can still enjoy exceptionally low interest on their loans for increasingly long periods of time,’ he explained. ‘This golden age of rate reductions is coaxing more borrowers through the door, and with the guidance of specialist brokers there are plenty of favourable deals to help them contend with rising prices, especially as lenders are playing their part with some offering low product fees,’ he said.
‘The onus is now on the government to agree the finer details of its mortgage guarantee scheme and soon. Its £3.3 billion commitment to social housing was a small victory in last week’s Spending Review, but a meagre share of the total £100 billion investment. We must hope it encourages the private sector to put more faith in property and act now to increase housing supply,’ he added.