Is everyone a winner when house prices are rising?
House prices are on the rise – usually the symptom of a an increasingly buoyant property market. But some economists are warning that you can have too much of a good thing.
Prices rose by 3.1 per cent year-on-year in June to £242,000 on average, marking the strongest annual upturn recorded by the Office for National Statistics (ONS) in the last six months.
On a monthly basis, values rose by 0.4 per cent, equalling the increase recorded in May.
House prices in London have soared by 8.1 per cent year-on-year, but growth remained patchy, and in Scotland and Northern Ireland prices edged down by 0.9 per cent and 0.4 per cent respectively.
Wales recorded the strongest annual house price growth in the UK, at 4.3 per cent, while England saw a 3.3 per cent rise.
The Royal Institution of Chartered Surveyors (Rics) report said house prices are rising at their fastest pace since their 2006 peak last month.
The number of would-be buyers looking to enter the market in July also saw the strongest growth in four years, in further signs that a recovery is “round the corner”, the survey said.
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Feelgood factor
Observers think the rise could be an indication that government measures to boost home ownership have started to stimulate the market.
Miles Shipside, housing market analyst at Rightmove, said “having higher house prices has the feelgood factor”.
He added: “People feel wealthier and spend more and confidence is high, and it is generally good for everybody.”
However, Mr Shipside also points out that higher house prices might not be enough to get the economy moving.
He said: “You need fluidity in the property market. At the moment house prices are getting higher, but the speed of sale and volume of scale are small.
“The lack of supply to the market is still small, property is expensive and it’s difficult to build new homes in the UK.”
Winners and losers
Ray Boulger, senior technical manager at John Charcol, said there are “winners and losers” in a buoyant property market.
He told Channel 4 News: “People who own their own home, who want to trade-down or own more than one property, will benefit.
“However, some first-time buyers [could struggle] because income fell last year and the average mortgage rates have gone up.”
This has lead to a mortgage price war, with lenders offering some of their lowest ever rates.
Figures from the Council of Mortgage Lenders on Monday showed a record take-up by borrowers of fixed-rate mortgages.
Some mortgage experts have been advising that with the prospect of interest rates remaining at their historic lows for some years, borrowers should be considering longer-term fixed-rate products such as five-year deals to lock in cheap rates for longer.
Mr Boulger added: “A longer-term fixed-rate means that [first-time buyers] can sleep at night.”
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Our biggest asset
However, Communities Minister Brandon Lewis insists that what is happening in the housing market is good news.
He told the BBC Radio 4 Today programme: “There’s a real historical situation in our country where the house is probably the biggest asset anybody owns.
“It’s certainly one of the most expensive for most people and therefore they want to believe and understand they’ve got strong equity in that and good value in it.”
When asked if it is bad news for the UK if house prices increase because not enough properties are built, Mr Lewis said: “If house prices are going up purely because we haven’t built enough homes and that delays people getting into a new home, then that in itself is not a good thing.
“That’s why it’s important that we have brought in this whole structure of measures to make sure firstly the new homes are getting built – nearly 320,000 over the last couple of years – and also that people have got access to finance to buy that first home.”