London house prices climb 17%
By Emily Cadman
UK house prices rose by 8 per cent in the year to March, down from a rate of 9.2 per cent in February. Month on month, the price of an average house fell by 0.5 per cent.
But the headline numbers obscure vast regional differences. In London, prices were up 17 per cent on the year, compared to a 0.3 per cent rise for Northern Ireland.
The UK-wide dip, which echoes slight falls in the Halifax house price index, will raise hopes that the new Mortgage Market Review, which has imposed tougher affordability criteria on borrowers, is taking some of the froth out of the market.
A Treasury spokesperson said they would remain vigilant and noted “the government has given the Bank of England the tools to do that, and they should not hesitate to use those tools if they think it will help with economic stability”.
Excluding London and the South East, UK house prices increased by a more modest 4.7 per cent in the year to March.
But even this slower rate is much higher than inflation – Office for National Statistics data published on Tuesday show consumer price inflation rose to 1.8 per cent in the year to April, remaining below the Bank of England’s target rate of 2 per cent.
This rise from last month’s figure of 1.6 per cent was in line with economists’ expectations. Because Easter was in March last year and April this year, airfares were higher in the period covered by the most recent inflation data. In addition, petrol prices declined sharply in April last year, whereas this year saw virtually no change.
However, the rise focuses attention on the fact that a sustained recovery in real wages is yet to happen. Inflation is now back above the most recent earnings growth of 1.7 per cent in the three months to March.
Samuel Tombs, UK economist at Capital Economics, said the increase in inflation was likely to be a “blip” and should not be seen as a sign that the economic recovery is causing price pressures to build.
Separate data from the ONS showed the price of goods at the factory gate remained essentially flat in April, reinforcing the perception that inflationary pressures were muted, Mr Tombs added.
Sam Hill, UK economist at RBC Capital Markets, said the broader perspective on UK inflation was one of “relative optimism”.
Pointing out that before 2014 there had been just six months in five years where inflation had been below the BoE target, he said it was “reasonable to plan on the basis of CPI remaining just below target for the rest of the year”.
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