15th April 2014
UK property prices jumped 9.1% year-on-year in February with London prices up an eye-watering 17.7% official figures show writes Philip Scott.
The latest numbers from the Office for National Statistics (ONS) reported that house prices jumped almost 2% over the month of February, following rises of 0.6% and 1% respectively during December and January.
As a result, the annual rise in house prices accelerated to 9.1% in February, up from 6.8% in January and 5.5% in December, taking them to their highest level since June 2010.
Howard Archer, chief UK and European economist at IHS Insight says: “The ONS data highlighted the worrying strength of house prices in London where talk of a bubble is already fully justified as the year-on-year increase surged to 17.7% in the capital in February from 13.2% in January and 12.3% in December.”
Archer however does not believe that the strength of house prices is a major concern beyond London, at least for the moment and that housing market activity is still not unduly strong compared to long-term norms.
He adds: “Nevertheless, the very strong ONS data can only stoke concern about a general housing market bubble developing as it shows that strength in house prices is becoming more widespread. Meanwhile, there is considerable underlying momentum in housing market activity even if mortgage approvals currently remain below long-term average levels.”
The ONS stated that “house price growth is increasingly strong across most parts of the UK.” Specifically, the data shows that annual house price inflation excluding London climbed to 6.4% in February from 4.7% in January and 3.3% in December. Among the regions seeing significant increases in February were the South East, up 8%, the East at 7.7% higher and East Midlands, where prices firmed by 7.6%. The smallest annual gain in any region in February was the North East, at 2.9%.
But with market data and surveys consistently showing strong buyer interest, house prices look set to see further strong increases over the coming months, especially given the fact that market activity is being supported by substantially improved consumer confidence, markedly rising employment and extended low mortgage interest rates, as well as the Government’s Help-to-Buy scheme. Limited supply also continues to be a driver.
Archer highlights the latest Royal Institute of Chartered Surveyors survey, which indicated that while the headline sales-to-stock ratio dipped to 37% in March from 38% in February, it nevertheless marked the sixth consecutive month above its long run average of 32% and was the highest reading, after February, recorded post-2008. In regards to the numbers, RICS said: “The imbalance between supply and demand is proving to be an enduring feature and still the main catalyst behind house price appreciation. Indeed, while new buyer enquiries improved at a pretty similar pace between March and February, new instructions fell marginally for the third consecutive month, further compounding the disparity.”
For his part Archer anticipates that house prices will increase by around 8% in 2014 with gains across the country. He adds: “Furthermore, the ONS data highlights a very real possibility that this could prove to be a conservative forecast particularly if already significantly improving housing market activity and rising buyer interest is increasingly supported by the “Help to Buy” mortgage guarantee scheme.”