U.K. House Prices Rise to Record on London Surge
(Corrects to say trough instead of peak in second paragraph.)
Values increased 0.4 percent from July to an average 233,776 pounds ($370,000), the London-based real-estate researcher and LSL Property Services Plc (LSL) said in a report today. In London, prices have risen 40 percent from their trough in April 2009, compared with 16 percent nationally.
The Bank of England-run Funding for Lending Scheme has helped to cut mortgage costs, while Chancellor of the Exchequer George Osborne’s Help to Buy program allows people to purchase a home with a deposit of as little as 5 percent of the value of the property. The BOE has downplayed speculation that a bubble may be brewing, saying activity is still at a low level relative to its pre-crisis peak.
“The property market has turned over a new leaf after years of restrained activity,” said Richard Sexton, director LSL unit e.surv. “The government has been pivotal in providing the aid that the market has been craving for many years.”
Eight of the 10 regions tracked by LSL recorded price gains in the latest three months compared with a year earlier. In the southwest and Wales, where values fell, the declines eased, according to the report.
Acadametrics estimates that completed housing transactions exceeded 70,000 in August for a second month. That would mark the first time that sales over two consecutive months have been above that level since November-December 2007, when transactions were 104,486 and 84,524.
BOE Governor Mark Carney said yesterday that while the market is improving, activity levels, mortgage applications and valuations are still low. He also said prices will continue to increase, and the Financial Policy Committee of the central bank will be “vigilant.”
“It is still too early to predict what impact the economy will have on prices, especially as the FPC may apply downward pressure through controls over mortgage supply and pricing,” Sexton said. “Thus nothing can be set in stone yet.”
The Royal Institution of Chartered Surveyors said today that the FPC should limit annual house price increases to 5 percent to prevent another property bubble. This could be implemented by capping loan-to-value ratios, mortgage durations or limiting the amount banks are allowed to lend, RICS said in an e-mailed report.
“The Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest-rate increases,” said Joshua Miller, an economist at RICS. “This cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise.”
-- With assistance from Svenja O’Donnell in London. Editors: Andrew Atkinson, Andrew Langley
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