U.K. home sellers raised asking prices for a fifth consecutive month, pushing values to a record and giving the market its best start to a year since 2004.
Prices sought rose 2.1 percent in May to an average 249,841 pounds ($380,000), taking the increase in the first five months of the year to 9.1 percent, property-website operator Rightmove said in a report today. London asking prices increased 3.3 percent to 509,870 pounds, also a record.
The report suggests a credit-easing program and the government’s March budget, which pledged 3.5 billion pounds to help homebuyers plus billions of pounds more in guarantees, may be boosting confidence in the property market, which has been hampered by the lackluster economy. Bank of England Governor Mervyn King raised forecasts for growth and lowered those for inflation last week, noting a “welcome change” in the outlook.
“The pressure cooker of the London property market has been building up a head of steam every month since the beginning of the year,” said Miles Shipside, director at Rightmove. “For those with money, many options to borrow remain open in spite of the credit crunch, and this is helping fuel the London price boom.”
The monthly increase in asking prices in London was led by Camden, up 7.2 percent, and Brent, up 5.9 percent. Kensington and Chelsea recorded a 0.6 percent increase, taking average asking prices in the city’s most expensive district to 2.37 million pounds.
“The tumbling of records is being driven by the equity-rich generation with a definite southern bias,” said Shipside. “Despite a new national record, it’s not green-shoots of recovery across the board, especially for the deposit-strapped mass-market.”
From a year earlier, national asking prices rose 2.5 percent this month, according to Rightmove, while the annual gain in London was 8.6 percent. Prices are partly being boosted by a limited supply of homes. In the first five months of the year, the number of homes advertised for sale nationwide has fallen 3 percent compared with a year earlier. In the capital, there was a 5 percent decline.
Recent house-price data have suggested the market is reviving, with the Royal Institution of Chartered Surveyors reporting this week that its property-price index rose to the highest in almost three years in April. Mortgage lender Halifax said on May 8 that prices increased last month to the highest since 2010.
Speaking in a Sky News interview yesterday, King said the government’s plan to aid homebuyers “is a little too close for comfort to a general scheme to guarantee mortgages” as in the U.S. He said it shouldn’t become a “permanent feature of our financial landscape.”
Asked whether the plan would fuel a bubble in house prices, King said values were 14 percent below their peak.
“Interest rates are low right across the world and that inevitably pushes up asset prices,” he said. In the U.K., house prices have been “remarkably stable for the last few years. That’s not a bad position to be in.”
By contrast, New Zealand’s Finance Minister Bill English said rising home prices will increase pressure on the Reserve Bank of New Zealand to raise interest rates.
“These households heading into quite high debt to buy highly priced houses need to be aware at some stage the RBNZ will increase interest rates, particularly if the housing market keeps growing at rapid rates,” English said yesterday in an interview broadcast on Television New Zealand’s Q+A.
Rising property prices are also putting pressure on policy makers in Asia. In China, new-home prices increased last month in 68 of 70 cities tracked by the government, indicating Premier Li Keqiang will need to maintain efforts to cool the property market even as economic growth slows. Increases in Guangzhou, Beijing and Shanghai were the biggest on a yearly basis since a change in data methodology in January 2011, a report from the National Bureau of Statistics showed May 18. crucial stage.’’
Elsewhere, Thailand reported a slower-than-estimated 5.3 percent economic expansion in the first quarter, boosting the case for the central bank to add to interest-rate cuts around the region. In the U.S., the Federal Reserve Bank of Chicago will release its National Activity Index for April later today.