by Mark Johnston
House Prices keep on Rising!
It appears that new figures are showing that house prices grew faster in May this year than at any time in the past six years.
The number of mortgages on the market has increased sharply since the Government launched a scheme called Funding for Lending last August, which has given lenders access to cheap finance to help borrowers.
Over the last few months most lenders have been slashing their rates and they have also reported increased numbers of first time buyers entering the market.
Properties are also selling quicker with sellers achieving prices closer to their asking prices. The average time on the market fell back to 8.8 weeks, which is at its lowest level since July 2010. The percentage of asking price achieved is just under 94 per cent, the highest level since July 2010.
According to Nationwide building society’s latest house index house prices are rising at the fastest annual pace for 18 months.
Average property prices rose 0.4 per cent in May and are 1.1 per cent higher than a year ago, the biggest annual rise since November 2011.
Also according to Hometrack, the property analytics business, house prices rose 0.4 per cent last month, which is the most since May 2007
The latest signs of life come amid worries over a house prices boom as the supply of new homes fails to keep up with the increased demand.
David Newnes director of property group LSL, has recently warned that “the boost to house prices provided by more activity could be problematic as it made homes less affordable to new buyers”.
Matthew Pointon, property economist at Capital Economics, said he believed much of the optimism about a housing market recovery “is misplaced”.
Some industry experts believe that the rise in housing market optimism could help prices to make further gains over the coming year, but confidence is fragile and it could easily evaporate.
It seems that the house price increase comes at a time when the new ‘Help To Buy’ scheme was unveiled in the March Budget.
Amid the recent unveiling of this new government backed scheme a number of experts have warned it will drive up house prices to artificial levels.
Many critics, including the outgoing Bank of England governor Sir Mervyn King, the Royal Institution of Chartered Surveyors (RICS), the Organisation for Economic Co-operation and Development (OECD), and various other campaigns for affordable housing, have warned that the Help To Buy scheme risks fuelling a new housing boom.
Duncan Stott, a spokesperson for the first time buyer campagin Priced Out, also added “Pumping more money into a housing market with chronic undersupply has one surefire outcome and that is pushing up house prices.”.
However all this said, a recent study by the Organisation for Economic Co-operation and Development (OECD), which compared prices with local wages and rents, suggests British house prices are 31 per cent too high compared to rents and 21 per cent over-priced against incomes.
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