11:39 AM, 2nd July 2014, About 8 years ago 2
The UK average house price has now surpassed the 2007 peak by almost 1%. However, if you exclude London figures the average is still 0.4% below the pre-credit crisis high with London actually 30% above.
Year on year figures in the Nationwide survey show the UK average house price rise was 11.8% to £188,903, while London had its greatest increase since 2005 up 25.8% to £400,404.
The figures below show a regional break down of what the picture looks like across the whole country.
|Region||Average Price||% Change|
|Outer South East||£230,409||14|
|Yorkshire & Humberside||£142,661||7|
The UK housing market is almost a pure supply and demand based model dictating the price, with supply not keeping up with demand being the over riding factor leading to the price increases we are seeing. The supply of housing has consistently fallen behind for the last 10 years and we need to build over 250,000 homes each year just to balance current levels of demand. (see table below)
Mark Carney, the Governor of the Bank of England, has identified the housing market and a potential boom and bust scenario as the biggest single domestic threat to the economy. As the Bank of England cannot control supply it is trying to dampen future demand by capping Loan to Income multiples that banks can lend to borrowers with a maximum 15% of loans per bank being allowed above a 4.5 time income threshold.
This new tool at the Banks disposal means it can affect this one micro economy without risking the the UK’s overall fragile recovery by the blunt single instrument of increasing interest rates. In fact latest employment productivity figures show that the output per employee in the first quarter of the year actually fell by 0.1%. It is this spare capacity in the economy that the Bank of England are now carefully monitoring before considering any future interest rate rises, with this latest figure actually showing a deflationary pressure along with current low wage growth.
The simple economic truth is we just need to build more to ensure long term stability for all, because shelter is a basic human necessity and demand can’t be easily suppressed.
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