U.K. September Home Prices Rise as Aid Programs Boost DemandScott Hamilton and Fergal O’Brien
U.K. house prices rose for an eighth month in September as government aid programs boosted demand, according to a report by Halifax.
Home values increased 0.3 percent from the previous month to an average 170,733 pounds ($276,600), the mortgage unit of Lloyds Banking Group Plc said in a statement in London today. From a year earlier, values increased 6.6 percent.
Britain’s property market has strengthened in recent months, prompting concerns that the government’s Help to Buy plan may fuel a bubble. Bank of England Governor Mark Carney said yesterday policy makers must ensure the housing market recovers in a sustainable way and Chancellor of the Exchequer George Osborne has given the central bank the power to carry out an annual review of his program.
“Demand has risen more quickly than supply in recent months, putting upward pressure on prices,” Martin Ellis, a housing economist at Halifax, said in the statement. “There are signs that supply is beginning to respond to the pick-up in demand, which if continued should help to constrain the upward pressure on prices.”
In the third quarter, home prices were 2 percent higher compared with the previous three months. From a year earlier, they were 6.2 percent higher in the quarter, the biggest increase since June 2010. Values are still 14 percent below their 2007 peak, Halifax said.
The number of homeowners putting their properties up for sale climbed for a seventh month in September, and house building is showing signs of improvement, Halifax said.
In addition to Help to Buy and the BOE’s credit-boosting Funding for Lending Scheme, housing is being bolstered by an improving economy. Gross domestic product rose 0.7 percent in the three months through June and GfK NOP Ltd.’s index of consumer confidence rose to a six-year high last month.
Prime Minister David Cameron announced on Sept. 29 that the second phase of Help to Buy will begin three months earlier than planned. While the first phase helped to contribute to the strongest housing activity since the financial crisis, Cameron said that it is fixing a “failure” in the mortgage market and BOE controls to prevent overheating are “very, very robust.”
BOE Markets Director Paul Fisher played down fears of a housing bubble in a speech yesterday and the central bank has said it will be “vigilant” on risks.
Mortgage approvals rose to 62,226 in August, the most since February 2008, the BOE said on Sept. 30. While that’s up from 47,600 a year earlier, it compares with an average of about 104,000 in the decade through 2007.
“The housing market is clearly gathering momentum,” Fisher said in London yesterday. “I don’t see any evidence of bubble behavior as yet, with mortgage lending still subdued relative to what is likely to be normal levels of activity.”