UK House Prices Rise, Inflation Falls

An indicator of economic recovery is resurgence in the housing market in an economy. People only take on new or larger mortgages when they are confident about their own personal futures and, of course, when money is being lent again. Once new buyers enter the market, demand is taken up and prices will start to rise since there will be competition for the best properties. The UK government has set up programmes, supported by the public purse, to help buyers find the money needed to make deposits on property purchases. The scheme is controversial since some are opposed to the state helping private individuals in this way as a matter of principle and others believe that it could stimulate demand sufficiently to produce a housing bubble. When such a bubble bursts, the state will take a big hit because it has underwritten a proportion of the loans which would inevitably be foreclosed.

However, in the meantime, house prices in the UK have risen by an average of 3.1% year-on-year, up from 2.9% for the comparable May figure, according to the Office for National Statistics. The Royal Institution of Chartered Surveyors claims that house prices are increasing at their fastest rate since November 2006 – i.e. before the start of the Global Financial Crisis. As one would imagine, the picture is fractured with house prices rising most in London and the South East rising most whist some prices in Scotland and Northern Ireland have continued to fall. House sales are fastest in the North East of the country and the West Midlands where some of the most significant falls were seen.

The consumer inflation rate, the Consumer Price Index, has fallen back to 2.8% in July from 2.9% in June. The broader based Retail Price Index has also eased from 3.3% in June to 3.1% last month.