May News: UK housing market
Multiple reports online have focused on developments in the UK housing market. Some suggest the market is starting to stabilise, while others draw attention to the height of house prices, the highest in almost seven years.
The housing market has been a predominant fixture of the media over the past few months, as headlines show either an optimism for growth, or a fear of potentially acidic bubbles which if they burst could have a corrosive effect on the UK economy.
According to a BBC Report, UK house prices are reaching a steady rate. Prices in May rose by just 0.7 per cent compared to a 1.2 per cent rise in April, which could suggest that prices are becoming more stable.
How stable is stable?
But even with some reports highlighting the stability of the market, others stress the fact that housing market prices are up to a record high.
Data from Nationwide, the UK’s largest building society, shows that year on year growth for the average house price is up 11.1 per cent to £186,512; the highest figure since October 2007.
These figures come just days after the European Commission added its voice to the debate on the UK housing market, believing the government’s Help to Buy scheme could be a problem, and advised Chancellor of the Exchequer George Osborne to act.
Is Help to Buy the source?
Last October the government introduced its Help to Buy scheme which Mr Osborne has described as “the biggest government intervention in the housing market since the Right to Buy scheme” of Thatcher’s government in the 1980s.
Reports say that Help to Buy mortgages have accounted for 9 per cent of total mortgage completions in the first quarter of 2014.
Robert Gardner, Nationwide’s Chief Economist said: “The modest numbers involved so far suggest that Help to Buy is unlikely to be the main factor behind the recent pickup in the wider housing market.”
While the cause of the spike in demand for housing may be difficult to locate, Mr Gardner also suggested that the underlying “demand for homes is likely to remain strong.”
We can expect to hear more about these issues after the Financial Policy Committee, whose role is to maintain financial stability, meets at the end of June.
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