According to data released today by the Halifax, UK house prices are now up almost 10% above the levels of just 9 months ago. Low interest rates have certainly been a big factor in the rise, with Nationwide’s figure showing an even steeper rise since April, as the chart from BBC News below attests.
When Nationwide released its figures last week, the data showed an 8.6% year-on-year rise and a 1.2% month-on-month rise, well above the corresponding 3.6% and 0.6% percent rises in the Halifax numbers. Perhaps this discrepancy is some sort of southeast data skew because house prices have been more buoyant in the southeast, where bonuses from the City of London’s financial sector matter. For example, upmarket estate agent Knight Frank reported that London luxury home prices were up 11.5% year-on-year, the largest such change since April 2008.
As in California, America’s property canary in the coalmine, supply and demand dynamics seem to be at play. Bloomberg reports:
Most of Knight Frank’s offices in central London have 15 percent to 20 percent fewer properties for sale than normal for this time of year, the broker said. At the same time, the number of potential buyers in January was 15 percent higher than the five-year average.
A shortage of properties can create a domino effect, as potential sellers wait until they have more choice of places to buy themselves, Bailey said.
“Slim pickings are the fuel that has been driving this market bounce,” Bailey said. Some vendors are starting to price their homes close to or even above peak levels again, which is a risky strategy “for anything other than perfect properties.”
I don’t see this taking off as it had done in the last decade. The bottom line in all of these home price surveys is that fewer Britons have negative equity. Come summertime, pent-up supply could add a tremendous amount of inventory to the market and upset the supply-demand imbalance which has been fuelling price increases.
See also The London Real Estate Bubble Is Back—and It’s Scary from the Wall Street Journal