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U.K. House Prices Rise 0.4% on Demand, Halifax Says

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U.K. House Prices Rise 0.4% After Government Aid, Halifax Says
An estate agent is seen placing a "For Sale" advert in the window of the estate agents office in Folkestone. Photographer: Chris Ratcliffe/Bloomberg

June 6 (Bloomberg) -- U.K. house prices rose for a fourth month in May as government measures to help the property market boosted demand, Halifax said.

Home values increased 0.4 percent from the previous month to an average 166,898 pounds ($257,600), the highest since August 2010, the mortgage unit of Lloyds Banking Group Plc said in a statement in London today. From a year earlier, prices were up 3.7 percent.

The property market is showing signs of recovery after the Bank of England’s Funding for Lending Scheme helped to lower borrowing costs and the government set up a program to help people buy homes. Data today from LSL Property Services Plc showed that home purchases by first-time buyers rose 15 percent in April to a 13-month high.

“Market activity has improved slightly in recent months although home sales remain low by historical standards,” said Martin Ellis, housing economist at Halifax. “Despite these recent signs of improvement in the housing market, the subdued economic background and the accompanying weak income growth continue to be a significant constraint on housing demand.”

In the three months through May, house prices were 1.5 percent higher than in the previous three months, according to Halifax. From a year earlier, values were up 2.6 percent in the three-month period.

BOE data last month showed that mortgage approvals were little changed in April. In addition to the FLS credit-boosting program, Chancellor of the Exchequer George Osborne has pledged 3.5 billion pounds to help home buyers.

That plan has drawn criticism, with the International Monetary Fund saying there must also be measures to boost the supply of housing.

“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,” the IMF said last month.

To contact the reporter on this story: Fergal O’Brien in London at fobrien@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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