House prices rise £7,000 in a month in largest leap for a decade

Thursday, June 5th, 2014



Property prices see their biggest month-on-month rise since 2002 after jumping 3.9 per cent in May, according to Halifax

House prices leapt by nearly £220 every day in May, marking the biggest month-on-month rise over a decade, Halifax reported.
The average UK property value went up by 3.9 per cent last month to £184,464, from £177,648 at the end of April.
It was the fastest price increase since 4.2 per cent month-on-month growth was recorded in October 2002.
It continues a trend of strong house price figures after Nationwide reported on Tuesday that property values had reached an all-time high of £186,512 on average after soaring 11.1 per cent in 12 months.

Stephen Noakes, mortgages director at Halifax, said: "Demand is still strong and continues to be supported by a strengthening economic recovery.

"Consumer confidence is being boosted by a rapidly improving labour market and low interest rates, although growth in average earnings still remains weak.

"However, there are signs of a revival in housebuilding which should bring supply and demand into better balance and curb upwards pressure on prices over the medium and longer term."

The mortgage lender warned that monthly price movements can be “volatile” and quarterly figures are often a more reliable indicator of the market.

House prices fell in both March and April before seeing a strong increase in May which meant the quarterly measure was two per cent higher than in the three months to February.

The year-on-year property prices rose 8.7 per cent in May, compared with 8.5 per cent in April.

There has been mounting speculation that the Bank of England may recommend measures to calm the apparent housing boom, such as rolling back the Government’s Help to Buy mortgage support scheme.

Banks are starting to place tougher limits on high-value mortgage landing.

Royal Bank of Scotland (RBS) and Lloyds Banking Group have announced that people applying to take out mortgages worth more than £500,000 will see the amount they are allowed to borrow limited to four times their income.

Brokers believe these moves are sending out a signal that property values will not be able to rise at their current pace indefinitely, which could make buyers more cautious when faced with higher prices.

Toughened industry-wide mortgage lending rules came into force at the end of April which mean people applying for a home loan face more detailed questions about their personal spending.

Mortgage lenders also have to apply "stress" tests to make sure customers could still afford their repayments when interest rates rise.

Halifax highlighted HM Revenue and Customs (HMRC) figures showing there were 103,690 home sales in April, which is one third higher than in April 2013.

Source: Halifax/Datastream/Capital Economics

Howard Archer, chief UK and European economist at IHS Global Insight, described the 3.9 per cent monthly uplift in prices as "a real bolt from the blue and at face value (and) unsettling for policymakers".

He said: "It will certainly ramp up pressure on the Bank of England to come up with more measures to rein in the housing market...

"The Halifax house price data have been highly erratic recently, but there is no getting away that the underlying trend still looks strong."

Halifax cautioned that monthly movements in house prices can be "volatile". On a month-on-month basis, house prices had fallen in both March and April, before the strong increase seen in May.

It said that figures showing the quarterly change in property values can be a more reliable indicator of underlying trends in the market.

The quarterly measure showed that house prices in the three months to May were 2pc higher than in the three months to February.

Price to earnings ratio: key facts

Comparing house prices to wages, or earnings, is seen as a key measure of value for the property market.

- It has risen from 4.73 to 4.96 so far this year alone;

- The long-term average is 4.1;

- Its highest recorded level was 5.82 in April 2007;

- The peak before the 1989 boom turned to bust was 4.97;

- It remained constantly over 5 between March 2004 and July 2008;

- Its lowest recorded level was 3.07 in December 1995; Assuming no wage growth, today's market would need to fall 38pc to reach that level.


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