A U.K. house-price index rose to the highest in more than a decade last month as government measures boosted homebuying and supply failed to keep up with demand.
A gauge by the Royal Institution of Chartered Surveyors increased to 58, the highest since June 2002, from 57 in October, the London-based group said in a report today, citing a poll of property surveyors. A three-month price-expectations measure advanced to 59, the highest in 14 years.
The Bank of England took action last month to restrain the strengthening property market by ending incentives for mortgage lending under its credit-boosting program. Demand has been partly fueled by the BOE’s Funding for Lending Scheme and the government’s Help to Buy program, and RICS said surveyors predict prices will rise 3 percent over the next 12 months.
“It’s no secret that the housing market is on the way up and prices are surging ahead in many parts of the country,” said Simon Rubinsohn, RICS chief economist. “If there is not meaningful increase in new homes, the likelihood is that prices, and for that matter rents, will continue to push upwards, making the cost of shelter ever more unaffordable.”
London led regional gains, with a reading of 99 in November, RICS said. Each of the 10 U.K. regions tracked by the group saw prices rise for a second successive month, it said.
A sales-to-stock ratio, an indicator of the supply-demand mismatch, climbed to its highest since October 2007 as the number of unsold properties fell to “historically quite low levels.” The flow of properties coming onto surveyors’ books “has almost ground to a halt,” while buyer interest is growing almost at the strongest pace on record, the group said.
With the economic recovery gaining traction, RICS said its gauge of expected sales climbed to the highest since it began recording the data in 1998.
The BOE’s change to the FLS “could well have some impact on the number of people able to purchase a home,” Rubinsohn said. “Although the improvement in wholesale and retail funding markets may mean the impact on mortgages is relatively limited.”