UK house prices

UK house prices

Published: October 19 2006 12:26 | Last updated: October 19 2006 22:25

Residents of Kensington and Chelsea in London reportedly have the highest life expectancy in the UK. This is fortunate, since they will have many years to enjoy some of the country’s most expensive houses. Property prices in the borough, according to website Rightmove, have risen by almost two-thirds in just 12 months.

Although prices are rising fastest in London and the south of England, asking prices in the whole of the UK rose 11.5 per cent year-on-year in the month to October 7. While that is higher than other recent market measures, it is increasingly clear that signs of cooling over the summer were merely a blip.

The bears continue to argue that house price inflation must at some point fall back into line with household income growth. Measured in terms of real disposable income, this fell to just 1.5 per cent in the second quarter, well below its 2.7 per cent long-run average. A more “appropriate” rate of house price rises would thus be about 4 per cent nominal. But this argument, though convincing, will be outweighed by a strong one: a shortage of houses. According to the Royal Institute for Chartered Surveyors, new instructions to sell property are declining at their fastest pace since June 2002. Of more significance is that the number of new houses will not catch up with the number of new households for at least a decade.

The government conservatively projects that, over the next 10 years, 220,000 new households on average will be created each year. Meanwhile, it hopes to raise net new dwelling completions from 166,000 last year to 200,000 by 2016.

Obviously, other factors such as interest rates will play an important role in the market’s trajectory. But the maths of the demand/supply equation are incontrovertible.

Lenders are certainly optimistic. Woolwich, anticipating record City bonuses, last week launched the first mortgage aimed at those expecting big windfalls in the new year who want to buy now. Since it will lend a minimum of £500,000, Kensington and Chelsea might well be the place to start looking.

House price here are very very crazy! The price rose two-thirds in a year!!!