Financial News

  • 2 May 2014, 17:06

House Prices: Best Annual Rise 'Since 2007'

The latest snapshot of UK house prices points to an acceleration in growth, with the biggest annual rise since 2007 recorded in April.

The Nationwide House Price Index charts a 1.2% increase month-on-month and a 10.9% rise over the past 12 months - with the top end of the market in London and the South East leading the charge.

The performance took the average cost of a home in the UK to 183,577, Nationwide calculated.

Its monthly report was released as a study by the housing charity shelter and auditors KPMGwarned that pricescouldquadruple in 20 years if more is not done to tackle the housing shortage, whichis seeing 100,000 fewer homes than are needed being built each year.

High demand but poor supply of properties for sale has been a major factor behind the recovery in the housing market in the wake of the financial crisis - with schemes to help people secure a mortgage, such as Help to Buy, stoking the interest.

Robert Gardner, Nationwide's Chief Economist, said: "The introduction of Mortgage Market Review (MMR) measures could have an impact on activity levels in the months ahead as the new measures bed down.

"However, underlying demand is likely to remain robust, as mortgage rates remain close to all-time lows and as consumer confidence improves further on the back of stronger labour market conditions and the brighter economic outlook.

"Earnings growth is beginning to pick up, with wage increases finally outpacing the rise in the cost of living in February.

"Nevertheless, house price growth is outstripping income growth by a wide margin.

"The risk is that unless supply accelerates significantly, affordability will become stretched.

"The upturn in construction of new homes continues to lag far behind the upturn in demand, with the number of new homes being built in England still around 40% below pre-crisis levels (and this was already insufficient to keep up with the increase in the number of households being formed).

"MMR measures, which place a greater emphasis on affordability, should help to ensure that prices do not become detached from earnings.

The Nationwide report highlighted that higher priced properties in London and the South East accounted for a higher proportion of transactions during April - renewing fears of a price bubble.

Mr Gardner added: "In London, the proportion of housing transactions involving properties over 500,000 has increased from 13% in 2007 to around 25% in 2013.

"The share involving properties of over 1m has more than doubled from 3% to more than 6%."

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