U.K. house prices rose to a record last month as easier access to credit drove first-time buyers back to the market, Acadametrics said.
Values increased 0.5 percent from August to an average 235,534 pounds ($376,000), the London-based real-estate researcher and LSL Property Services Plc said in a report today. London is leading the property-market recovery, with annual house-price growth in the past three months more than double any other region in England and Wales.
The second phase of the government’s Help to Buy program was introduced this week, providing government-guaranteed mortgages to buyers with smaller deposits. The acceleration has fueled further concerns that the initiative may stoke a bubble. Mortgage approvals rose to the highest in more than five years in August, the Bank of England said last week.
“We’ve seen banks ease criteria on mortgages for people with small deposits, which has opened the door to new buyers who have spent years on the outside looking in,” said David Newnes, director of LSL Property Services. “Demand has increased significantly in a short space of time, and raced ahead of the supply of homes.”
Nine of the 10 regions tracked by LSL recorded price gains in the latest three months compared with a year earlier, according to the report. London price growth was 8.5 percent, compared with an average of 3.5 percent. In Wales, the pace of the decline eased. Nationally, house prices rose 3.8 percent, or 8,526 pounds, in September compared with a year earlier.
House sales rose 12 percent this year compared to 2012, with the increase in transactions predominantly in the first-time buyer sector of the market, Acadametrics said.
LSL said concerns about a housing bubble developing are overblown. While prices are rising, it is only a “fledgling recovery,” Newnes said. “It is not a boom or a bubble. It is a market correction, albeit a fairly quick one.”
The whole country will benefit from Help to Buy because it supports buyers in the southeast, where prices are higher, and in the north, where wage growth is slower, Newnes said. He added that the program must be complemented by more house building so supply keeps pace with demand.