According to a recent survey by The Royal Institution of Chartered Surveyors, British house prices are rising at their fastest pace in seven years. There is a fear that government lending incentives are creating a new property bubble.The RICS seasonally adjusted house price balance jumped to +36 in July from +21 in June and just +5 in May of this year.
That was the best reading since November of 2006 and one of the sharpest improvements over a three-month period since 1978 when these surveys began. The survey shows evidence of returning confidence in the property market through data from mortgage lenders.
Last week, Halifax announced that annual house price inflation jumped to 4.6% in the 3 months to July and likely to continue to rise in the coming months. The Bank of England last week made an indication that it was likely to keep interest rates at a record low for at least a further three years.
Combined with government initiatives to lower the cost of mortgage finance and to help people onto the property ladder, that could sustain the upward momentum in house prices for some time. Records show that prices are now rising in all regions of the country which suggests that confidence is rippling out from the South East.
There are further signs that market confidence is growing, the balance measuring new buyer enquiries rose for a sixth consecutive month to 53, the highest its been in four years. The strength of the property market will add to criticism of a government scheme to offer state mortgage guarantees, due to come into force in January 2014.
The International Monetary Fund has already warned the scheme will push up prices rather than increase supply, but finance minister George Osborne insists the scheme will go ahead and run for three years, as planned.
It is thought that The Bank of England will also be watching house prices closely. When giving his first press conference last week, Governor Mark Carney came across as very relaxed regarding property inflation. But the bank’s commitment to keep rates at record low is contingent on inflation expectations and financial stability remaining anchored.
Acquaint find this story very interesting and would like to hear your views on the inflation in British house prices!