House prices rise again in June
House prices increased once again in June 2013, offering further evidence the housing market is recovering.
But the figures indicate that while London and the south east are propping up prices, the property market in other areas of the country are displaying flat, negligible or negative growth.
Prices rose across the UK by 0.3% in June, taking the average price of a home to £168,941, according to Nationwide Building Society.
It means the annual growth in house prices is now running at 1.9% – the fastest rate since September 2010. But this annual rate of growth remains well below inflation – running at 2.7% – meaning house prices are falling in real terms.
Nationwide said prices continued to be boosted by the government’s Funding For Lending Scheme as well as improved job prospects.
Robert Gardner, Nationwide's chief economist, explained: "Demand for homes has been supported by further modest gains in employment, as well as an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme. Signs of a modest improvement in wider economic conditions may also be playing a role in boosting buyer sentiment."
On a quarterly basis house prices in the second quarter of 2013 were 0.4% higher than the first three months of the year, and 1.4% up compared with the same period 12 months ago.
London was once again the best performer, with prices up 5.2% in the second quarter year-on-year, taking the average price of a home in the capital to a whopping £318,214 – 5% above their 2007 peak.
House prices in England are currently 5% lower than their 2007 peak, while they are 13% lower in Wales, 12% Scotland and 53% lower in Northern Ireland.
London safe haven
Jonathan Hopper, managing director of property agent Garrington, said: "For prices in the capital to be 5% above their 2007 peak is nothing short of incredible. The London property market is an extraordinary microcosm. It has effectively broken free of the rest of the UK and is operating in its own stratosphere.
"While its jobs market has been resilient, the primary driver of the growth has been strong overseas demand. The global economy remains turbulent and London is seen as a safe haven by the internationally mobile.
"There is without doubt more momentum in the property market and this latest data from the Nationwide is further proof of that. Confidence is crucial to the property market and people certainly feel a lot more confident about the economy at the moment."
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.