More UK house price contradiction

So its ‘that’ time of the week again. Yet another release of housing data to confound the Bears and give solace to those who own a house – but certainly not to the millions desperate to get on the housing ladder.

According to the governments Department for Communities and Local Government (DCLG) house prices across the nation increased by 5.6% year to May – an increase of 0.5% on April.

According to the study the average property in the UK now stands at £190,051.

Interestingly it was Northern Ireland that should the biggest growth with a stunning increase of 16.9% on a year ago.

Last week we reported that the largest building society, Halifax, had reported that the market was slowing, and that prices fell in June by 1.2% primarily because of concern over potential interest rate increases.

As usual the reason for the difference in the numbers comes down to the way in which each group calculates the figures. Interestingly, the DCLG uses house prices on completion, whilst mortgage lenders use mortgage approvals or initial asking prices.

These figures therefore represent a more accurate view of the market and we for one find that the numbers are a concern. In typical house market bubbles previously there has been a ripple effect as prices outside of London start to catch up and accelerate even as London is stabilising. Usually the bubble will burst worse in these areas, as they are more prone to interest rate hikes and job insecurity.

We hope that the bank of England is watching these numbers and not be swayed by the made up numbers touted by the building societies. If house prices are back on the march again this will have dire consequences further down the line. The BoE needs to take this into account – as well as other factors of course such as the Bank of Japan outcome later this week.

Once again we caution those looking to stretch themselves in the market at the moment, the risk factors are getting too large.