UK House Prices Higher than Ever
According to a recent survey from the Office of National Statistics, UK house prices have hit their highest level since the house price index was first calculated in 1968. The survey found that the index stood at 185.8 in August of this year, rising from the previous peak of 185.5 when the index was last calculated in 2008.
The figures suggest that the price of property in Northern Ireland, Wales and England is on the rise, but house prices are continuing to fall in Scotland, with the average cost of a flat or house in the UK being £247,000. In London and the South East prices have risen by 3.8% in the last year and by 2.1% across the rest of the country.
Similar Surveys Glean Conflicting Results
The Office of National Statistics generous estimation of average house prices has been called into question by similar surveys carried out by bodies such as Nationwide and Halifax. According to a Halifax report which was released this month, the average price of a home in the UK is actually just shy of £171,000, more than £30,000 less than July 2007 when property prices were at their peak.
The differing results are due to the methodology used by the Office of national Statistics which calculates results based on transaction prices, as opposed to mortgage approvals which were used by both Halifax and nationwide to complete their surveys. In addition, high priced London properties get greater weighting in the Office of National Statistics calculations. However, both all the surveys completed suggest that the volume of transactions taking place is well below what was seen at the height of the boom.
New Results Could Indicate Housing Bubble
The recent surveys are causing commentators to question whether the UK is set to fall victim to a housing market bubble but according to the chief economist of HIS Global Insight Howard Archer the country is ‘a long way off’ from this happening. But Archer warned that the current Help to Buy scheme being implemented by the coalition government could significantly inflate property prices.
The scheme makes it possible for purchasers to secure a home with a 5% deposit, but if a purchaser defaults lenders can reclaim a percentage of the money lost from the government. Last Monday in a speech given to MPs in the Treasury Committee Sir John Cunliffe, deputy governor of the bank of England attested that ‘it doesn’t look like we are in a bubble.’ But added that the Help to Buy scheme could be problematic for households, claiming that homeowners could become ‘overexposed’ because the scheme allowed them to borrow more, which ‘could create more risk’ in the housing market.
Shelter Calls for House Price Stabilisation
Despite the generous estimations of the Office of national Statistics and the government’s new scheme, a new report form Shelter has found that unless house prices are regulated and stabilised the majority of UK citizens now in their 20s have less than a 50% chance of ever owning their own property.