U.K. RICS House-Price Index Hits 11-Year High on Help to BuyEshe Nelson
A U.K. house-price index rose to the highest in more than a decade in October as government programs to boost home ownership increased the pressure on supply across the country.
The gauge by the Royal Institution of Chartered Surveyors increased to 57, the highest since June 2002, from 53 in September, the London-based group said in a report today, citing a poll of property surveyors. A separate report showed mortgage lending climbed to the highest level in almost six years in the third quarter.
Prime Minister David Cameron announced yesterday that more than 2,000 people had been accepted for a government-backed mortgage under his Help to Buy initiative, which has drawn criticism from the International Monetary Fund and politicians for potentially stoking a housing bubble. The program, which has reduced down-payment requirements to as little as 5 percent, is allowing “hardworking people” to get onto the property ladder, Cameron said.
“It’s no secret the housing market is gathering some momentum,” said RICS Chief Economist Simon Rubinsohn. “A greater willingness by lenders to increase loan-to-values on mortgage products allied to the Help to Buy scheme has meant that more and more first-time buyers are in a position to enter the market.”
The pound dropped 0.7 percent to $1.5872 at 10:23 a.m. London time after a report showed inflation slowed more in October than economists forecast. The benchmark 10-year gilt yield was down 1 basis point at 2.79 percent.
The gap between demand and supply widened to the most since May 2009, RICS said. The number of sales relative to stock climbed to the highest since October 2007, as the number of new properties coming on to the market were outpaced by the level of transactions. House prices are expected to continue rising in all regions except northern England and sales expectations climbed to the highest on record, RICS said.
“This imbalance urgently needs to be addressed,” Rubinsohn said. “House-building starts have picked up recently but we are still well behind in terms of the amount of properties needed. If we are to create a more sustainable market, it is critical that many more good-quality homes are built in areas where people want to live.”
In the next 12 months, house prices are expected to increase 3 percent nationally, up from 2.6 percent in September, RICS said.
The Council of Mortgage Lenders said today that 170,700 loans for house purchases were advanced between July and September, the most since the fourth quarter of 2007.
A separate U.K. house-price index slipped in September from a record level in August, though it was 3.8 percent higher than a year earlier, the fastest annual growth rate since 2010, data from the Office for National Statistics showed today. The increase was led by London, where home values jumped 9.4 percent.