UK house prices hit new record as London average breaks £500,000

http://www.theguardian.com/business/2014/sep/16/house-prices-record-bubble-interest-rates-uk

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House prices hit a fresh record high in July after surging by 11.7% over the last year, according to official figures.

The average price of a British home stood at £272,000 following three consecutive months of double-digit price rises. Most of the UK's regions saw house values jump above their pre-financial crisis peaks, fuelling concerns that much of the UK's recovery has been fuelled to a large degree by a booming housing market.

Scottish house prices soared to a record high, while the east Midlands, the West Midlands and the south-west joined London, the east and the south-east in having price levels higher than their pre-financial crisis peaks of 2007/08, the Office for National Statistics (ONS) said.

Property values in London continue to rise faster than the rest of the country, recording a 19.1% year-on-year jump, and taking the average property price in the capital to £514,000. But the pace of growth slowed from 19.3% in June and hinted at a cooling off in activity during the summer compared to the hectic pace of growth in the same period last year.

Several surveys have showed a slowing in activity as a mix of low wage rises and sky-high prices restrict buyers from obtaining mortgages.

Emphasising how difficult it has become for new entrants to the market, the ONS said prices paid by first-time buyers in July were 13.5% higher on average than the same month last year. For owner-occupiers moving home, prices increased by 10.9% for the same period. On a month-on-month basis, property values increased by 1.6% across the UK between June and July.

Chris Williamson, chief economist at Markit, said the consistent double-digit price rises will "add to worries that the property market poses a key risk to financial stability".

He said there will be officials in the Bank of England, which is the chief financial regulator, who fear "that macro-prudential tools may be insufficient to cool the housing market without an accompanying rate hike".

Howard Archer, chief economist at IHS Global Insight, said: "Stretched house prices to earnings 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."

Connells Survey & Valuation said its own survey of activity in August showed a drop in transactions over the last year. It said the total number of valuations was 13% higher than in July, though 4% fewer when compared with August 2013.

Spokesman John Bagshaw said: "August has seen a bounce back from a particularly quiet July. Yet this is still quieter than a year ago. That's partly because August 2013 was particularly strong – an exceptional month for comparison, being the first time where it was clear the property market was moving into sustained positive territory."