Econintersect: House prices in the UK are off to the races, driven primarily by a boom in the southestern part of England, which includes London, based on data reported by Bloomberg and others from Hometrack Ltd. According to the Financial Times the housing market is seeing its biggest price advance in six years. That last time was at the top of the last housing bubble.
Click on graphic for larger image.
Graphs are from Global Property Guide and contain data only through the middle of 2012.
An inventory shortage in London is behind the price increases. According to Bloomberg London supply rose by 3.5% in April while demand increased 5.6%. Over the entire UK market increases in new buyer registrations are much closer to the rise in supply of houses for sale.
Realtors are cheering the sudden market boom but others are waving caution flags. There is concern that the government housing program may lack sustainability and may simply serve to reduce affordability and availablity for some Brits. From Bloomberg:
While Osborne’s Help-to-Buy program, announced in March to help the housing market, “may temporarily help boost confidence,” the IMF added a note of caution.
“There is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house-price increases that would work against the aim of boosting access to housing,” it said. The fund added that the government should consider measures such as disincentives for holding land without development to alleviate that.
There is even concern about a new bubble. From the head of the Council of Mortgage Lenders comes this via the Financial Times:
The government risks destabilising the housing market unless it sets out an exit strategy for its Help to Buy scheme, the head of the Council of Mortgage Lenders has warned.
Paul Smee is the latest influential figure to raise concerns about George Osborne’s ambitious plan to help more people onto the housing ladder. The Help to Buy scheme offers equity loans for people buying new homes and government guarantees on up to £130bn worth of high loan-to-value mortgages.
Smee is concerned that a bubble with inflate and then collapse when the government program ends in three years.
Sources:
- Southeast drives fastest rise in UK house prices for six years (Sarah O’Connor and Chris Tighe, Financial Times, 27 May 2013)
- U.K. House Prices Rise Most in Six Years on London Demand Surge (Fergal O’Brien, Bloomberg, 27 May 2013)
- IMF Says U.K. Must Keep Focus on Reviving Economic Growth (Svenja O’Donnell, Bloomberg, 22 May 2013)
- Ministers urged to devise exit strategy for Help to Buy scheme (Sarah O’Conner and Jim Pickard, Financial Times, 24 May 2013)