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'Robust' house price growth fuelled by buy-to-let and low supply


03-04-2016

Houses 
Demand for housing continues to outstrip supply Credit: Rex

House prices are rising at a “robust” pace, according to Halifax, as demand continues to outstrip supply.

Prices rose by 9.7pc in the year to February, remaining unchanged since the previous month.

This contrasts with another index, from rival lender Nationwide, which reported an annual change of 4.8pc, and said growth was “steady”.

Nationwide also reported a monthly increase of 0.3pc, but Halifax reported a decrease of 1.4pc in house prices in the last month. 

Nationwide says its data crunching is “more robust” than that of its rival, but neither are comprehensive indices, as they both derive only from their mortgage operations, unlike indices from the Office for National Statistics and the Land Registry.

Samuel Tombs, economist at Pantheon Macro, said that the data may be affected by sampling errors. He added: “Nationwide’s measure of house prices underplays the extent to which the housing market is heating up again”, adding that “February’s sharp fall in the Halifax measure of house prices is not a convincing signal the market is cooling”.

House price indices over time
House price indices over time Credit: Pantheon Macro

Halifax said that the price increase was due to a “significant imbalance between supply and demand”, and Nationwide pointed to a rush to buy before April 1, when stamp duty increases by 3pc for those buying second homes and buy-to-let properties.

Martin Ellis, a housing economist at Halifax, said: “There are some tentative signs that the supply situation may be beginning to improve.

“Instructions for secondhand properties coming up for sale have increased in the past two months and the level of house building increased significantly in 2015."

A report by ratings agency Standard and Poor’s earlier this week suggested that low interest rates were being passed on to consumers, allowing them to borrow more money, which is pushing up house prices. The report predicted that UK house prices would climb by 5pc this year, matched by similar rises in Germany and Ireland.

Robert Gardner, Nationwide’s chief economist, said: “The number of mortgages approved for house purchase increased sharply in January to almost 75,000, up from around 71,000 approvals in December and the highest number since January 2014.

“However, much of the increase is likely to be related to the impending increase in stamp duty on second homes, which is due to take effect in April 2016. This is likely to have brought forward a significant number of purchases, which in turn will probably result in a fall back in approvals during the spring/summer.

“Looking through this volatility we expect the underlying pace of activity to increase in the quarters ahead as improving labour market conditions and low borrowing costs provide ongoing support.”

Russell Quirk, chief executive of online estate agent eMoov, said: “The impending stamp duty changes due in April have no doubt helped to keep the UK market buoyant."

www.telegraph.co.uk

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