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U.K. House Prices Surge 3.9% to Highest in Six Years

U.K. House Prices Surged 3.9 Percent Last Month
An estate agent arranges a sign offering mortgage advice amongst a display of residential properties up for sale in London. Rising demand and a shortage of supply have fueled prices, particularly in London. Photographer: Simon Dawson/Bloomberg

U.K. house prices surged 3.9 percent last month as rising demand pushed values to the highest in six years, according to Halifax.

Prices have risen 11 percent in the past year to an average 184,464 pounds ($309,000), the mortgage lender said today. That’s the highest level since April 2008, and the report may add to concern that the housing market is overheating.

Rising demand and a shortage of supply have fueled prices, particularly in London. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, the owner of Halifax, have imposed restrictions on mortgage lending to counteract the surge in the capital. The Bank of England’s Financial Policy Committee has said it’s “alert” to risks and will review the housing market at its meeting this month.

“Housing demand is still strong and continues to be supported by a strengthening economic recovery,” said Stephen Noakes, mortgages director at Halifax. “However, there are signs of a revival in housebuilding which should bring supply and demand into better balance and curb upward pressure on prices over the medium and longer term.”

In the three months through May, home values increased 2 percent compared with the previous three months and were up 8.7 percent from a year earlier, according to Halifax.

Nationwide Building Society said this week that house prices based on its index rose to a record last month, and the European Commission said Britain needs to do more to boost homebuilding.

“We are alert to risks represented by the acceleration of asset prices, particularly property,” FPC member Richard Sharp said in a speech yesterday. “When using its tools, the FPC aims to take graduated and proportionate action, where possible.”

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