UK property soars as US teeters on the brink

Latest figures from the UK show that the housing market is defying all expectations and once again surging forward. At the same time over in the US property prices are slowing down in some sectors and going into reverse in others.

The UK government Department for Communities and Local Government (DCLG) said prices rose by 6.0% in the year to July, up from 5.2% in the year to June.

In particular, prices surged ahead in London, with annual price inflation in the capital rising from 5.8% in June to 7.0% in July.

Average property in the UK now sits at £194,454 ($380k) according to the DCLG.

According to the BBC –

‘The acceleration in house price inflation…confirms that the property market enjoyed a firm rebound during the summer months,’ said Milan Khatri, of the Royal Institution of Chartered Surveyors.

All regions of the UK are experiencing annual house price growth above the level of the retail price index.

The government figures confirm a trend for accelerating house prices that has also been evident in the Nationwide and Halifax house price indexes for last month.

These latest figures are very likely to impact upon the next MPC meeting of the Bank of England and increase the likelihood of a 0.25 percent hike in rates. It seems buyers and borrowers in the housing market shrugged off the last increase by the BoE.

Economist Howard Archer of Global Insight, was also quoted as saying  ‘Many potential house buyers will be alarmed by the very real possibility that interest rates could rise again before the end of the year. We think these mounting affordability pressures will increasingly outweigh the support to the housing market coming from high employment and a relatively healthy economy’.

As noted in our recent article we are concerned that lenders are becoming increasingly lax about lending and affordability. At the moment for many buyers desperate to get into the market there is little concern about repaying debt and more focus on just finding ways to leverage as much debt as possible – a damn the consequences.

The Bank of England needs to very seriously look at the current over priced market sector and find a way of pricking the bubble more rapidly. News of further increases will only encourage more profligate borrowing. All the while the Housing Market in the UK pretends that it, and it alone has found a way of defying reality.

 An Englishmans Home should be his castle, not a millstone.