House prices rose by more than expected in July
UK house prices rose by a larger-than-expected 0.9 per cent in July, according to the Halifax House Price index. Analysts had forecast a rise of 0.5 per cent following an upwardly revised 0.7 per cent growth in June.
In the three months to July, house prices rose 4.6 per cent compared to the same period the year before. Again, this was more than the 4.3 per cent increase analysts were expecting.
The findings corroborate those of Nationwide, who noted a 0.8 per cent monthly rise in July.
Howard Archer, chief UK and European economist at IHS Global Capital, says he expects solid gains over the rest of the year, but sees constraints from low earnings growth and relatively limited housing market activity compared to long-term norms.
However, with consumer confidence strengthening appreciably, employment elevated, the economy looking stronger and the Funding for Lending Scheme and the Help to Buy initiatives fuelling activity, there is a very real and mounting possibility that house prices could surprise on the upside. A shortage of properties is also likely to support house prices in some areas, notably London and the South East.
While an improving housing market is helpful to growth prospects, it is vitally important for stability and longer-term growth prospects that a new housing price bubble does not emerge. Consequently, should the housing market gain substantial momentum over the coming months, the case for dropping the “Help to Buy” mortgage guarantee scheme that is due to start in 2014 will strengthen, even if the government may find this politically difficult to do.