U.K. House Prices Bolstered by Improving Economy, Halifax SaysEmma Charlton
U.K. house prices rose in the three months through April and demand for properties continues to outstrip supply, according to Halifax.
Values increased 2.3 percent compared with the previous three months to an average 177,648 pounds ($301,300), the mortgage unit of Lloyds Banking Group Plc said today. While prices declined in April from March, Halifax said monthly changes are volatile. Separately, the Royal Institution of Chartered Surveyors said house prices remain on a “firmly upward trend” that is set to continue.
“Housing demand continues to be supported by an economic recovery that is gathering pace,” said Stephen Noakes, mortgages director at Halifax. “With supply of properties being slow to respond to market conditions, stronger demand in the past year has resulted in upward pressure on house prices.”
The Organization for Economic Cooperation and Development said this week there has been an “insufficient” increase in the supply of property for sale and warned of overheating in the market. Bank of England Deputy Governor Jon Cunliffe said policy makers need to be “vigilant” and “ready to act.”
RICS echoed the OECD, citing an imbalance between demand and supply as a “key driver of price appreciation.” It’s house price index was at 54 in April, compared with 57 in March and 3 a year ago.
“The critical issue for the market remains the lack of second hand supply, with our numbers suggesting that the picture is, if anything, getting worse,” said Simon Rubinsohn, chief economist at RICS.
While the Halifax report showed home values fell for a second month, slipping 0.2 percent, rising confidence and low borrowing costs continue to support the market, it said. From a year earlier, prices climbed 6.8 percent in April. In the past quarter, the annual increase was 8.5 percent.
A broadening economic recovery, government incentives and record-low interest rates are fueling property demand after the financial crisis caused banks to curtail lending. BOE policy makers will probably leave their benchmark rate at 0.5 percent today, according to a Bloomberg News survey of economists.
The surge in home prices over the past year has been led by London, and Rubinsohn said there are “some tentative signs” that momentum in the capital may begin to slow in the second half of the year. In the RICS survey, the three-month price expectations gauge for London fell to 49 percent in April from 61 percent in March.