Average house price reaches £175,000
02-11-2014
The average house price is rising at 7.3pc annually, but remains 12pc below the 2007 peak
A young mother looks for homes in London
Experts are divided over whether the UK is entering a house price bubble. Photo: © Jeff Gilbert / Alamy
By Nicole Blackmore
House prices grew to an average of £175,546 in the three months to January, up 7.3pc compared to the same period a year ago, according to Halifax.
The UK’s biggest mortgage lender said house prices climbed 1.1pc in January following a 0.5pc fall in December caused by seasonal factors.
The figures will further fuel concerns that a house price bubble is emerging, however prices are still 12pc below the peak of £199,612 in August 2007.
Nicholas Ayre, managing director of homebuying agency Home Fusion, said: “The definition of a house price bubble is when people will pay anything for a property. This is not what we are seeing here. Many people are still heavily indebted, particularly if they have maxed out on credit cards. This is hardly a market running away with itself.”
But earlier this week economic forecasters the EY Item Club said London is beginning to show “bubble-like conditions”.
It said the cost of buying in the capital is 3.5 times more than the average house price in Northern Ireland and over 3.3 times the average in the North East. It added income multiples are now back to pre-crisis levels in London as homeowners take on increasingly expensive mortgages.
The EY Item Club predicted the average house price in the capital will rise to £600,000 by 2018.
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Howard Archer, chief UK economist at IHS Global Insight, said while he does not believe the UK is in the grip of a bubble, house prices look set for strong increases over the coming months – especially as a shortage of available properties is putting pressure on prices in a growing number of locations.
Matthew Pointon, property economist at Capital Economics, said: "If prices continue to rise by 1.1pc per month, house prices on this measure will pass their previous peak by the end of the year, which will stoke concerns that a new house price bubble is forming. But we expect gains will moderate over the year.
"Rising wholesale interest rates suggests mortgage rates are likely to edge up over the year, curbing demand. And improved selling conditions should mean more homes come onto the market, relieving the upwards pressure on prices."
Halifax said more than one million houses were sold in 2013. This is the first time this has happened since 2007, just before the financial crisis struck.
The number of homes sold rose for the ninth successive month in December to 103,040 – 30pc higher than in December 2012.
The number of homeowners providing instructions to put their property on the market for sale increased only marginally at the end of 2013 and is still some way short of the number of new buyer enquiries.
This week George Osborne, the Chancellor, warned demand for houses will continue to exceed supply for another decade despite reforms to the planning system and an upturn in construction.
Mr Osborne insisted that the pick up in house prices did not amount to a dangerous bubble, and said it will be 2020 before house prices return to their pre – recession peak in real terms.