British house prices hit new record highs in July, after witnessing an 11.7 per cent surge over the last 12 months, according to new official figures from the Office for National Statistics (ONS).
The cost of an average UK home now stands at £272,000 in the wake of three consecutive months of double-digit price rises. The majority of the United Kingdom’s regions saw house prices soar above their pre-recession values, fuelling significant concerns that the majority of the UK’s economic recovery has been largely fuelled by the booming housing market.
House prices in Scotland have also soared to a record high, whilst the East Midlands, the West Midlands and the South West have joined London, the East and the South East in having prices levels above those recorded before the financial crisis, according to the ONS.
The value of properties in London continues to rise at a much quicker pace than the rest of the country, recording a year on year jump of 19.1 per cent, bringing the average property price in the capital to £514,000. However, the pace of growth has slowed from 19.3 per cent in June and hinted at a cooling of activity during the summer, compared to the explosive pace of growth recorded in the same period a year prior.
A number of surveys have displayed a slowing in activity as a mix of practically non-existent wage rises, sky high prices and more stringent lending rules have combined to restrict buyers from obtaining mortgages.
Whilst emphasising how difficult it has become for new buyers and fresh entrants to the market, the ONS stated that price prices paid by first-time buyers in July were 13.5 per cent higher on average than the same month in 2013. For homeowners moving house, prices increased by 10.9 per cent for the same timeframe. Property values increased by 1.6 per cent across the UK between June and July on a month on month basis.
Chief economist at Markit financial information services, Chris Williamson, said that the consistent double digit price rises are set to “add to worries that the property market poses a significant risk to financial stability.”
He further stated that there will be officials in the UK’s chief financial regulator, the Bank of England, who are afraid that “macro-prudential tools may be insufficient to cool the housing market without an accompanying rate increase”.
IHS Global Insight’s chief economist, Howard Archer, said: “Stretched house prices to earning ratios, the prospect that interest rates will start to rise before long and tighter checking of prospective mortgage borrowers by lenders will likely have some limiting impact on buyer interest.
“Even so, with the economy seen holding up pretty well going forward, employment high and rising, consumer confidence elevated and earnings growth likely to improve (particularly in 2015), and with housing supply still tight in a number of areas, house price growth seems unlikely to fall away.”