UK house prices rise by 1.9% in February

http://www.theguardian.com/money/2014/apr/15/uk-house-prices-february-rise

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UK house prices continued to accelerate in February, rising by 1.9% during the month and pushing the annual rate of inflation to more than 9%, according to the latest data from the Office for National Statistics.

Commentators warned of a "superbubble" and said the market was "out of control" as the official figures reported year-on-year prices rises of 17.7% in London and said first-time buyers had experienced double-digit price growth.

The ONS said the average UK house price increased by 9.1% over the 12 months to February, to £253,000, up from 6.8% in January. First-time buyers paid an average of £192,000 – some £19,000 more than a year earlier.

The figures, which are based on sales financed by mortgages and completed during the month, showed price in England rose by 9.7% over the year and are now higher than their pre-crisis peak, recorded by the index in January 2008.

In common with other house price reports, the ONS figures showed that growth in England was driven by strong price movements in London and the south-east. Prices in the capital increased by 17.7% in the 12 months to February to an average of £458,000, in the south-east they were up 8.0% and in the east of England by 7.7%.

Sam Bowman, research director of the Adam Smith Institute, said the news was "devastating".

"This is a disaster – the housing market is out of control, particularly in London, making housing increasingly unaffordable for many people, particularly the poor and young," Bowman said.

"Rising house prices are nice if you own your own home and are planning on downsizing or want to leave your house to your children, but if you want to get on to the property ladder or move to a larger home, say, to start a family, the price rises revealed by today's news are devastating."

Oliver Atkinson, director of the online estate agents Urbansalesandlettings.co.uk, said the market in London was beyond a bubble. "What we're witnessing in the capital is a superbubble. Buying in London is surely now a high-stakes game," he said.

The ONS figures underline the gap in prices across the UK. Outside England, prices have still not returned to the level reached before the credit crunch, despite increases of 5.3% in Wales, 2.4% in Scotland and 2.8% in Northern Ireland.

Annual growth rates were lower than the UK average in many areas. In the north-east prices were up by 2.9%, underlining the difficulties policymakers may face if they try to limit growth in other parts of the country.

However recent reports from estate agents and surveyors suggest that in recent months the surge in activity and prices in the south-east has started to ripple out across the UK, buoyed by growing confidence in the economy and government initiatives to support buyers with small deposits.

Bowman said the biggest driver of prices was the planning system, which made it "inordinately difficult" for new construction to take place to allow supply to meet demand.

The ONS figures came as it emerged that a government scheme to boost supply of new properties had resulted in just 715 homes being completed in the two years after its launch.

The Get Britain Building scheme was launched in November 2011 to unlock homes on stalled sites with planning permission through offering access to £400m of development finance and was supposed to lead to 16,000 homes being built. However, the housing minister, Kris Hopkins, insisted it was on track to meet its targets.

Commenting on the ONS figures, Hopkins said: "This government is committed to delivering long-term economic stability and growth – the last administration oversaw a housing boom and bust and this government has been picking up the pieces."

He added: "We have a series of initiatives to boost housing supply, including the provision of affordable housing and to support a healthy private rented sector. Our long-term economic plan and efforts to cut the record deficit we inherited mean interest rates remain at a record low making home ownership more affordable."

Alex Hilton, director of the campaign group Generation Rent, said the price rises faced by prospective first-time buyers were "miserable news".

"Two-thirds of private renters would rather be living in a home they own than paying off their landlord's mortgage," he said.

"Double digit house price inflation is miserable news and wipes out government efforts on affordable housing. For 9 million renters, higher prices only means even higher rents as new landlords try to make a return on their increasingly expensive investments."

Unlike the Land Registry price index, the ONS figures include new-build properties, however they do not include the cash buyers currently estimated to make up around 40% of the market. Research by estate agency Savills suggests these buyers pay an average of 30% more for homes.