Supply issues dominate as house price rebound continues

House prices in the UK increased by 3.8 per cent on average over the year to August 2013, up half a percentage point compared to the year before according to data from the Office for National Statistics.

While the uptick suggests a continuing house price rebound, the data show that the growth acceleration continues to be driven by prices in London, which saw an increase of 8.7 per cent. Excluding London and south-east England, UK house prices increased by 2.1 per cent.

Year-on-year the increase reflects growth of 4.1 per cent in England, 1.1 per cent in Northern Ireland and 1 per cent in Wales, offset by a fall of 0.7 per cent in Scotland. ONS’s house price index surpassed its previous peak in January 2008 by 0.3 per cent.

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Andy Knee, chief executive of property service provider Legal Marketing Services, said: “There are several reasons why house prices are continuing to rise. Not only are mortgage rates currently at their lowest level but high rents and low returns on savings mean that an increasing number of people are turning to property as a means of investment.

“First-time buyers are competing with buy-to-let landlords for a very limited supply of houses. Until more houses are built and a sense of equilibrium is restored between supply and demand, prices will inevitably continue to rise.”

Ben Thompson, managing director of Legal and General Mortgage Club, said: “Whilst these rises are positive for those already on the ladder, over inflated prices make the dream of homeownership harder still for those still renting and looking to buy in the future.

“Ideally house prices would grow slowly, at or below the level of inflation, over a number of years. Increasing the availability of housing stock is the best way to meet the growing demand. Affordable new homes need to be built in the right parts of the UK enabling house prices to stabilise, and creating a more sustainable market place.”

Richard Sexton, director of e.surv chartered surveyors, said: “The housing market is rollicking along. Banks are more willing to lend to borrowers with low deposits. Consumer confidence is on the rise. And Help to Buy is set to open the door to thousands more buyers over the coming months.

“The Help to Buy scheme is sensible. It isn’t sub-prime lending. Rates on mortgages have been priced fairly high and credit checks are stringent. The real issue is a lack of house building, which could send house prices even further skywards.

“More homes need to be built to cater for demand and keep the housing market affordable for the many, not the equity-rich few.”