Is UK housing showing signs of a revival or a bubble?

In this month’s mortgage spotlight Laverne Hadaway looks at the possibility of the housing revival leading to a bubble. If not a long-term recovery, she argues we are at least in a resurgence. This is backed up by the Monetary Policy Committee (MPC) which referred to a “revival in the housing market” in a meeting in October.

Ms Hadaway argues that house prices moving upwards is often an indicator of a bubble beginning, and Nationwide’s house price index shows prices rose 5.8 per cent over the year to 31 October 2013. That said, a regional breakdown shows London and the South East are the particular hotspots with prices rising 10 per cent and 6.6 per cent respectively, but in the North prices rose only 0.2 per cent – hardly enough to constitute a price bubble.

“While the UK housing market is experiencing revival, it is inaccurate to describe what is currently happening as a bubble. Surveys of would be buyers suggest most people simply want to own their own homes, rather than viewing housebuying as a way of making money,” she says.

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“In fact, at the other end of the spectrum, some wonder how long this revival in the market is likely to be sustained. They fear that it could disappear virtually overnight with the end of government-sponsored schemes such as funding for lending and Help to Buy. Of course, the possibility that such schemes could contribute to a housing bubble in the future cannot be dismissed altogether.”