House prices hit "record high"

The Momentum UK Team 15 October 2013

House prices have risen to a record level, according to the latest figures from the Office for National Statistics (ONS)

The ONS figures show that in August, the house price index was at 185.8, topping its previous all-time peak of 185.5 in January 2008. The average house price in the UK is now £247,000 - the highest figure since the index was first calculated in 1968.

However, regional differences are significant; house prices have been rising in England, Wales and Northern Ireland, but are still falling in Scotland. The figures also reveal that, although house prices across the UK rose by 3.8% in the year to August 2013, when London and the South East are excluded from the calculations the price increase is just 2.1%.

Not everyone agrees with the assessment of the ONS; mortgage lenders Halifax and Nationwide have both recently said that their figures show house prices well below record levels. This is down to a difference in the way the figures are calculated; Halifax and Nationwide base their figures on mortgage approvals, whereas the ONS uses actual transaction prices in its calculations.

Some experts and commentators have voiced concerns over the possibility of a housing “bubble”, although others have said that these fears have been overstated. Howard Archer, chief UK economist at IHS Global Insight, said:

“We are a long way off from an overall housing market bubble emerging”.

However, he also added that the government’s Help to Buy scheme, which offers government backed mortgages to first-time buyers with smaller deposits, could significantly inflate prices:

“There is a significant risk that house prices could really take off over the coming months, especially if already appreciably improving housing market activity and rising buyer interest is lifted markedly further by Help to Buy.”

Meanwhile, the housing charity Shelter is calling for house prices to be stabilised, warning that if nothing is done most people in their 20s will stand less than a 50% chance of ever being able to own a home.