UK House Price Rises – Unsustainable or Flipping Great?

The UK housing market, and the reporting on it never cease to amaze me. The latest is that Nationwide has reported that house prices are now over 10% higher than they were last year, the first time year on year growth has broken into double digits in three years.

This, says the Times suggests that confidence sis returning to the market, before covering everything else that suggest an upbeat housing market. Meanwhile the Guardian says that the growth is unsustainable, because it is based on low interest rates and weak supply, neither of which will last indefinitely and also because the growth since last March has pushed the average house price up to 5.5 times the average income, well above the 4x long term average.

I am with the Guardian, and have been saying the same since the growth began last March. It is clearly being shown as being unsustainable now however, by irrefutable evidence.

According to the Rightmove index for April, 25000 homes have been coming onto the market every week for the last two months, that is 108,000 per month. The British Bankers Association data tells us that only 34,905 mortgages were approved in March, an increase on the 33,360 approved in February, but well short of the 6 month average of 40,000. So, failing an unbelievable increase in mortgage approvals, this increasing supply does not bode well for the growth, which as was already covered has been partially fuelled by weak supply.

Thank fully the madness seems to be coming to an end. The Land Registry house price index, which is widely regarded as the most accurate registered a 0.6% decline in March, contradicting the data given by the lenders. The Land Registry has not shown a couple of monthly falls in the past 6 months, but returned to growth the following month. With supply increasing at the rate it is and mortgage approvals down, one has to suspect that this time will be different.

Like this post? Subscribe to our feed by RSS or Email, join our newsletter(s) or leave a comment using the form below.