House price boom brings new wave of sellers into the market

Property website Rightmove says shortage of homes and buying frenzy have driven asking prices to record level

Surging house prices have prompted a wave of sellers to put their homes on the market, according to Britain's biggest property website, Rightmove, but it added that near-frenzied buying activity is sending asking prices to record levels.

The average asking price on the site jumped by £8,103 in January, equal to £261 a day, with the typical property now costing £251,964. Rightmove also said it had its 10 busiest days ever in January, with house hunters looking at 50m property pages a day for the first time, or about 500 a second.

The number of potential buyers sending emails to inquire about properties was also up around one-fifth compared with January last year and there was "firm evidence that interest is serious and being followed up", it said.

The booming market has provoked a big increase in the number of sellers, with 18% more properties being listed than a year ago. But Rightmove said it is yet to affect the supply shortage, as the number of homes being snapped up and removed from the site has risen in tandem.

Estate agents said they were also seeing more sellers come to the market. Haart, which is part of the largest estate agency group in the UK, said the number of properties advertised in its windows had increased by 10.6% over the past year. Its chief executive, Paul Smith, said: "It's good news that stock levels are increasing. However, new buyer registrations are up 41.2% annually so the market is still out of kilter."

The conventional approach to buying a home - where someone finds a house they like, then puts theirs up for sale – is breaking down in many local markets, where estate agents are not interested in prospective buyers unless they have sold already and can proceed immediately.

"Especially in the south, agents report that buyers with a property yet to sell are losing out to buyers able to proceed with speed," said Miles Shipside, a director and housing market analyst for Rightmove.

But bubble-like conditions in some parts of the country are making first-time buyers stretch themselves too far, warned the government-backed Money Advice Service. It researched 1,000 first-timers who had bought over the past two years, and found that one in five wished they had bought somewhere cheaper.

More than half admitted that the running cost of their first home was also more than expected, prompting the service to warn buyers: "You can afford your mortgage, but can you afford your home?"

Affordability is most stretched in London and the south-east. Haart said that over the past year, the average property it sold in London went up by 18.4% to £448,800, a rise of £69,784 over the year, double the average salary of a Londoner.

A Guardian/ICM poll last week found a growing exhaustion with rising house prices among the general population. Only 14% of people want house prices to continue to rise, while 63% would prefer they remain stable and 20% want prices to fall.

When asked to name the biggest problem in housing, 29% said it was buyers priced out of the market, a quarter said it was the lack of council housing, and 15% said it was excessive private rents.

But despite their despair over prices, most households expect them to continue to rise this year. A sentiment index produced by the upmarket agents Knight Frank found that households in every region of the UK perceive that the value of their home will rise over the next 12 months.

Expectations that rising interest rates may puncture a potential property bubble were dashed last week by the Bank of England governor, Mark Carney. He said he was comfortable with the City's view that interest rates would not rise before the spring of 2015 and then rise gently to 2% by 2017.

Figures from the Office for National Statistics suggest that higher house prices are also provoking a building boom. Figures released late last week revealed that in 2013 there was 1.3% annual growth in construction output, but it was "almost solely" attributed to house building, which jumped by 10.4% (£2.1bn) year on year.

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House prices in 2014 'to rise by 8%'

Rics says all areas of the country will see house prices increase, but transaction levels remain well below levels seen in 2006

The British housing market is ending the year strongly with mortgage lending rising by 30% in November, according to industry figures, with total borrowing for the year set to exceed expectations.

The value of home loans advanced to borrowers reached £17bn last month, up nearly a third on last year and putting the total value of home loans on track to hit £170bn in 2013, said the Council for Mortgage Lending.

The CML's chief economist, Bob Pannell, said coming restrictions on mortgage selling will keep a lid on lending next year, but estate agents were bullish about the prospects for 2014. The Royal Institution of Chartered Surveyors [Rics] said this week it expects demand to continue to outstrip supply, and the imbalance – driven by a lack of new housing – would lead to an 8% rise in prices next year.

Lending has been bolstered by the Bank of England's Funding for Lending scheme, which made more money available to banks and building societies to provide mortgages, and the second part of the government's Help to Buy programme, which offers a taxpayer-backed guarantee on 95% loans.

Pannell said gross lending, which does not take into account repayments, was set to reach £170bn in 2013 – higher than the group's forecast of £156bn but "a far cry" from the £363bn advanced in 2007 when the housing market was at its peak.

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House prices could rise by 8% next year, says Rightmove

Number of new properties failing to keep pace with transactions, with prices in London expected to rise by another 6%

House prices could rise by as much as 8% next year unless there is a flood of new properties on to the housing market, according to theproperty website Rightmove.

Its outlook for 2014 predicts that the number of sales and the pace of house price inflation will be up on this year. Rightmove forecasts average asking prices will rise by 6-8% in England and Wales compared with 2013 as the number of new properties coming on to the market fails to keep pace with transactions, putting a further squeeze on supply.

"There's a listing gap to fill. While sales transactions are up 13% so far in 2013, the number of newly listed properties is only up by 2%," said Miles Shipside, Rightmove director and housing market analyst. Rightmove said prices rose 5.4% this year.

Rightmove's latest monthly report on the housing market showed the average asking price in December was £241,455, down slightly on November. In month-on-month terms prices slipped back 1.9%, reflecting a typical winter slowdown but the smallest December fall since 2006.

The website, which advertises about 90% of all homes being sold by estate agents in the UK, said marked local variations in price movements would continue next year. It predicted that some towns and cities would see bigger price rises than the regions around them – a pattern that was seen this year within the more prosperous southern markets where places such as Bath, Bristol, Cambridge and Oxford all pushed up regional averages.

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British wage-earners have taken £5,000 pay cut in five years, figures show

Government figures will fuel debate about living standards before 2015 general election

Britain's wage-earners have taken a £5,000 pay cut in the past five years, according to government figures, suggesting ministers will struggle to engender a feelgood factor before the 2015 general election.

The figures published by the Office for National Statistics show wages and salaries for the middle fifth of non-retired households fell from £33,100 in 2007-08 to £28,300 in 2011-12. Over the same period original income, which is the income households get from employment and investments, fell from £37,900 to £32,600, while cash benefits rose from £3,100 to £4,600.

The figures will fuel the debate about living standards before the general election, and about whether the government has done enough to protect the typical wage-earner.

The figures confirm that the earnings squeeze pre-dates the 2007 recession, appearing to endorse Ed Miliband's claim that the link between wages and growth has been broken, one of his chief justifications for his willingness to intervene in the market. The report says: "While GDP per person continued to grow at similar rates between 2004-5 and 2007-8, growth of median household income slowed to a fifth of its previous rate in the years immediately before the start of the economic downturn."

The Treasury will be fervently hoping that it will be able to show the link has been restored in 2014, either because economic growth is so strong or because it has taken steps to make work pay with its welfare reforms.

But the figures also show that despite the big rise in personal allowances due to budget decisions by the Liberal Democrats and the Conservatives, median household income for the overall population has fallen by 3.8%, after adjusting for inflation, since the start of the downturn.

However, while the median income for non-retired households fell by 6.4% between 2007-08 and 2011-12, the median income for retired households grew by 5.1%.

Between 2007-08 and 2011-12, average income from employment and investments for the middle fifth of non-retired households fell from £37,900 to £32,600.

Cash benefits for the middle fifth of non-retired households rose from £3,100 to £4,600 between 2007-08 and 2011-12. As a result, the average proportion of gross income coming from cash benefits increased from 7.6% to 12.3% for this group.

Average direct taxes paid by the middle fifth of non-retired households have fallen from £8,700 in 2007-08 to £6,800 in 2011-12. As a percentage of gross income, this is equivalent to a fall from 21.1% to 18.3%.

Looking over a longer period between 1977 and 2011-12, the middle fifth of households saw an increase in unequivalised gross income from £18,500 to £30,100, after taking inflation into account.

The report confirms the extent to which the reforms have hit middle incomes, but also the way in which the retired have been relatively immunised, confirming there is an issue of inter-generational fairness to be addressed. The retired median household income is still much lower in absolute terms than non-retired income.

The Treasury countered the figures with its own report showing wage growth had followed GDP growth in the previous two recessions. It says that although wages have shrunk, this disguises the extent to which workers have been subsidised by higher company pension contributions or higher national insurance contributions.

The Resolution Foundation, a thinktank that specialises in this policy field, said: "It is striking that there was a pronounced slowing in the growth of median household incomes even before the years of economic downturn. It confirms that between 2004 and 2008 income growth slowed to a fifth of its previous rate, even as GDP growth kept up a consistent pace. This underlines Resolution Foundation work highlighting the major slowdown in wages and incomes that occurred well before the great recession.

"The figures also reveal a dramatic generational difference – with the incomes of working-age households falling by more than 6% since 2008 while those of retired households have continued to rise. The pre-crisis slowdown is likely to have been even starker if we looked only at working-age households."

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UK property taxes highest in developed world, says thinktank

Policy Exchange calls for at least one new 'garden city' and changes to planning rules to deliver 300,000 houses a year

British people pay the highest levels of property taxes in the developed world and more than twice the average for the 34 rich countries in the Organisation of Economic Co-operation and Development (OECD), according to a thinktank report.

The right-of-centre Policy Exchange said politicians should reject new levies on property – such as the "mansion tax" on residences worth over £2m favoured by the Liberal Democrats and Labour – and instead pledge to bring down housing costs by building 1.5m new homes by the end of the decade.

The report called for at least one new "garden city" and changes to planning rules to deliver 300,000 new houses a year.

Councils that fail to hit their own housing targets should be forced to release land to local people who want to design and build their own homes, said the thinktank.

The report calculated that property taxes including council tax, stamp duty, inheritance tax and capital gains tax amount to 4.1% of GDP in the UK – the highest in the OECD and well above the average 1.8%.

By comparison, Canada levies 3.5% of national income in property taxes, the US 3%, Japan 2.8% and Germany 0.9%.

Alex Morton, head of housing and planning at Policy Exchange, said: "No other developed country taxes property more heavily than the UK. Yet rising house prices and falling levels of home ownership have led to many calling for an increase to land and property taxes.

"But these issues will only be solved by genuine reform of the outdated planning system, not a tax raid on peoples' homes. Politicians cannot try to do everything at once and must focus on the most crucial issues.

"The evidence shows where excess credit and under-supply exist, taxation or subsidy can only have a limited impact. That is why policymakers should ignore calls for a new round of property taxes and instead commit to spreading the benefits of home ownership and stabilising the UK economy by building at least 1.5m new homes over the course of the next parliament.

"This means serious reform of the planning system and creating new ways to deliver housing."

Article Source : http://www.guardian.co.uk
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House prices: 'south-east set to outpace London' for first time in a decade

Prices in the south-east will rise 32% over the next five years, with London making gains of 24.4%, according to Savills

House prices in the south-east are set to outpace those in London over the next five years for the first time in more than a decade, as buyers priced out of the capital turn increasingly to commuter-land.

Upmarket estate agent Savills said its research showed the era of rising home ownership is over and predicted that more than a million people will move into rented accommodation by 2018, with renters also facing higher prices.

But prices for house purchase are forecast to rise even faster, with Bournemouth, Brighton, Windsor among the towns across the south expected to see average prices soar by 32% in the next five years. Surging prices will also be seen in affluent parts of the south-west and the Midlands, such as Bristol, Bath and Solihull.

In contrast, house prices in London will rise more slowly, making gains of 24.4%, just behind the national average of 25%, with rises across the UK but more slowly in Scotland, Wales and the north of England.

This compares to 9% growth in UK house prices from 2008-13, although, adjusting for inflation, house prices remain below their pre-crash peak and will barely have recovered in real terms by 2018.

News of accelerating house prices beyond London is bad news for people struggling to get on the housing ladder and find affordable places to rent: in a recent Mori poll for Inside Housing, 57% of people did not believe rising house prices were good for the country.

Lucian Cook, head of UK residential research at Savills, said London prices were at an all-time high compared with the rest of the UK, but predicted they would grow more slowly after 2015 as "affordability constraints" in the capital begin to bite. "As confidence improves, buyers are likely to look to markets beyond London that offer better relative value, though it will be later in the cycle before the north feels this benefit."

If the London property market drops down a gear, this would be a significant shift in the UK housing economy, as the capital is the only part of the country where house prices have fully recovered since the crash. London prices are around 10% higher than their pre-crash value but prices remain 10% below their pre-crash peak in the south-east and almost 25% below in the north-east.

"It is not just about a north-south divide. The gap between London and the south-east is incredibly high at the moment," said Cook.

The housing recovery will be slowest in the north of England, with Barnsley, Hartlepool and Middles brough among the towns set to see the smallest price rises. The government has been trying to haul the housing market out of recession, creating the £130bn Help to Buy mortgage guarantee scheme, which critics have warned is in danger of inflating a bubble.

Dismissing talk of an overheating market, Savills said Help to Buy would play a minimal role, predicting it would increase transactions by 12% over the scheme's three-year life.

"Help to Buy will allow some trapped renters to access home ownership even though the costs of home ownership will exceed those of renting," said Cook, but he said the majority of beneficiaries were likely to those who already own a home, rather than first-time buyers.

By 2018, 5.8m households will be in rented accommodation, a million more than today, while the number of home owners will continue to decline. "The age of growing home ownership is well and truly over," said Cook.

Average rents are set to go up by 21% in the next five years and by 26% in London. Roger Harding at Shelter said the statistics highlighted "the dramatic and ongoing impact of our housing shortage on ordinary families. The current rental market is already unstable enough – families now make up a third of all renting households, with many forced to jump from one short tenancy to the next and cope with rising rents. The situation is only going to get worse if the number of private renters rises as steeply as this research predicts.

"This doesn't have to be the future, but unless the government commits to building the affordable homes that we desperately need, house prices will continue to rise and the already overheated private rental market will struggle to cope with the added pressure from a priced-out generation."

Galloping prices in the capital have turned the spotlight on wealthy foreign buyers, but the estate agent insisted they were not driving house price inflation. "Much more important than individual buyers is the state of the economy," said Yolande Barnes of Savills. "London's economy has behaved fundamentally differently to the rest of the UK, because of the strength of the financial services industry." She also said any Treasury plans for charging capital gains tax on foreign buyers were unlikely to dampen foreign demand in the long-term.

But Savills is predicting a temporary slowdown in demand in "the tiny rarified markets" of Kensington and Westminster, as buyers delay purchases ahead of the election, fearing a future government could introduce a mansion tax. Property prices in the most expensive central London zones are set to fall 1% in the 2015 election year, but could rebound 8% afterwards if a mansion tax is not introduced.

Article Source : http://www.guardian.co.uk
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House prices rising in every region in England – Land Registry

Official data showing house prices have increased 3.4% in a year on average reignites fears of housing bubble

House prices in every region of England rose in September, according to official data published on Monday which reignited the debate about the prospects of a new house price bubble.

The Land Registry data showed that even before the government accelerated the second phase of its Help to Buy mortgage guarantee scheme, prices had increased 3.4% in a year on average, and were higher than in September 2012 in all English regions. However, prices in Wales were down by 1.7% year on year and fell by 0.4% in September.

Howard Archer, chief UK economist at IHS Global Insight, said: "There is a mounting danger that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the Help to Buy mortgage guarantee scheme, which will take full effect in January."

Overall house prices in England and Wales continued to rise in September, increasing by 1.5% over the month to an average of £167,063, according to the Land Registry. This remained below the peak reached in November 2007, when average prices hit £181,839. There was also a jump in the number of homes sold for more than £1m.

The data, which does not include newbuild homes or those which have not changed hands since 1995 – but unlike other indices does include cash sales – covers the period before the launch of the second part of the government's controversial Help to Buy scheme earlier this month. The scheme gives a taxpayer-backed guarantee to lenders offering 95% mortgages that are open to first-time buyers and home movers on newbuild homes worth up to £600,000. Critics have argued it will further fuel an already rising market.

But the Land Registry showed discrepancies among the regions and within the regions. London's housing market experienced the greatest annual price increase in September, of 9.3%, and while all the English regions showed growth, some boroughs experienced falls. Hartlepool, for instance, recorded the greatest annual price fall, of 9%, while even within London there were variations.

Matthew Pointon, property economist at Capital Economics, said he was still doubtful that the boom in house prices seen in some areas of the capital would spread to other parts of the country. "House prices are already elevated, real earnings are falling and although mortgage lending is beginning to recover, there is no evidence banks are desperate to expand their mortgage books," he said. "That said, by stoking up expectations of a house price boom, the Help to Buy scheme does represent an upside risk to prices. And if prices rise without a surge in mortgage lending, the Bank of England will be less willing, and able, to use their new powers to take the heat out of the market."

The latest snapshot of the market shows that over the past 12 months, prices have increased by 3.4% on average, and are higher than in September 2012 in all English regions. In Wales, however, prices are down by 1.7% year-on-year and fell by 0.4% in September.

The Land Registry figures show that house sales increased by more than 15% in the early summer, with an average of 62,034 a month between April and July, compared with 53,698 in the same period the previous year.

The number of properties sold for more than £1m in July was up by a third on the previous year at 1,143, of which 801 were in London. The imbalance of demand for homes and properties on the market in some areas has been one factor driving up prices, and in London, where there are large numbers of would-be buyers, the Land Registry said prices were up by 9.3% annually and by 1.9% over the month. The monthly rise was larger in the north-east of England, which recorded a 2.7% increase; however, annually prices were up by just 1.3% to an average of £101,262.

In London, the average price of a home is now £393,462, the Land Registry said. However, prices and price inflation range widely across the capital. In Hackney, prices were up by 12.8% year on year, and by 1.2% in September, to an average of £474,202, while in Newham they fell by 2.5% over the year and 0.3% over the month to an average of £225,738. In the UK's most expensive borough, Kensington & Chelsea, prices rose by 7.5% over the past 12 months to an average of £1.16m.

Outside London, prices are still plummeting in some parts of the country. In Hartlepool they dropped by 2.1% over the month and were down 9% on the previous year, to an average of £76,597, while in Torfaen in south Wales prices dropped by 2.8% in September and by 6.9% over the year.

Article Source : http://www.guardian.co.uk
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Chattering classes 'to be priced out of Islington housing market'

London borough will soon be preserve of ultra-rich and ultra-poor, says report

It has a place in the popular imagination as the spiritual home of the leftwing intelligentsia, its name synonymous with fashionable, middle-class metropolitans and – often said disparagingly – with Guardian-reading views. But perhaps not for too much longer: Islington is changing as a wave of "supergentrification" fuels its colonisation by London's financial elite.

Exploding property prices mean that the middle-income, middle class professional families – teachers, mid-ranking civil servants, doctors, lecturers and journalists – who have traditionally made up the Islington "chattering classes" can no longer afford to put down roots, a phenomenon researchers say will over time transform the character of the borough.

By the end of the decade, families who do not qualify for social housing will need to earn £90,000 a year just to afford to rent in the area, while house-buying will be out of reach for most, leaving the borough a place where "only the very rich and very poor can live", says the study.

The research, commissioned by the Cripplegate Foundation, a local poverty charity, concludes: "This will leave Islington polarised, with very wealthy families at the top, a youthful transient and childless sector in the middle, and those on low incomes at the bottom, living in social housing."

Islington has had many famous residents, including Lenin and George Orwell, who reportedly loved its run-down seediness. The former prime minister Tony Blair famously lived there in the early 1980s and 1990s, triggering a wave of acerbic rightwing jibes at "Islington person", a decadent, liberal leftwing type who embodied all the values alien to "middle England".

But it was also home, for a time in the 1990s, to the Daily Mail editor Paul Dacre, and is now as likely to be associated with wealthy Conservative residents, such as the London mayor, Boris Johnson, and the former international development secretary Andrew Mitchell. It has also had a smattering of Hollywood glamour, with residents including Kate Winslet, Emma Watson and James McAvoy.

According to the report, welfare reform and low wages will drive out to the suburbs increasing numbers of working-class residents, especially single parents and large families, who will be unable to afford market rents because of tighter limits on housing benefit.

The report's co-author, Faiza Shaheen, a researcher at the New Economics Foundation, said widening social inequality and the gradual exclusion of low and middle-income families in Islington is replicated in other areas of inner London, such as Camden and Hackney, with potentially damaging effects on the stability and health of local communities.

Both high- and low-income residents interviewed for the research were concerned at what they saw as a waning sense of community as rich and poor lived increasingly separate lives. The poor felt resentment at being "locked out" of their neighbourhoods, while the wealthy expressed "a fear of the unknown" – a heightened sense of suspicion of poorer residents.

Relatively high-earning young professionals expressed frustration that they could still just afford to rent rooms in flatshares, but were unable to settle down. "Jenny", a consultant working in Canary Wharf who was interviewed for the research (and has since left the borough), was paying £1,000 a month for a room in a shared house. She said: "I think Islington will basically turn into somewhere like Kensington and Chelsea, where only the super-rich can afford to go."

Prof Anne Power, a London School of Economics housing expert and longtime Islington resident, said: "At the moment, there's no clear evidence that the middle is being forced out of Islington – in fact it is still dominant. But if trends continue as they are, then it will become a different place. It maybe won't become as 'empty' as places like Kensington and Chelsea, but it will become emptier; and that's when a place starts to lose its heart."

Paul Williams, head of the Islington office of Savills estate agents, said anxieties about the changing nature of Islington had existed for years. The transformation started back in the 1990s, when "City and legal money" booted out the more "avant-garde and bohemian journalists". Despite the current changes, it he felt it was unlikely to lose its distinctive character, he said: "I'd be staggered if Islington went the way of Fulham."

Property prices have more than doubled over the past 12 years in Islington – house prices in the borough currently average £580,000 (more than £1m for terraced family homes), though this figure is higher in the sought-after white-stuccoed Georgian squares around fashionable Upper Street.

Jeremy Corbyn, Labour MP for Islington North, said: "£1m homes are not uncommon in Islington. Fifteen years ago they would have been affordable for teachers, medical workers and mid-ranking professionals. Now they are bought by very wealthy people or investment money coming in from overseas."

Corbyn, who has introduced a Rent Regulation private members bill in the Commons, added: "In future private rented places will be unaffordable and the poor will be forced out, while young workers pay high rents and can't afford to save. They feel very angry and very stuck."

The enrichment of parts of Islington may surprise some of the first wave of middle-class gentrifiers who arrived in the late 1960s, buying dilapidated Georgian town houses in districts then considered to be "no-go" slum areas, like Canonbury, where larger properties can easily now fetch £3m-£5m.

Martin Jones, 76, who lives in Highbury, a now well-heeled part of the borough, described how, when he and his wife moved to neighbouring Barnsbury in 1967, their bank manager laughed at their application for £4,000 mortgage to buy a four-bedroom house. "People were aghast that we should wish to move to Islington," he said.

Article Source : http://www.guardian.co.uk

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Estate agents and surveyors call for house price growth cap

Rics says Bank of England should use powers to calm market as new figures suggest record rise in prices

The Bank of England should take action to cap house price rises at 5% a year in order to prevent a dangerous new property bubble, reckless lending and a build-up in consumer debt, the Royal Institution of Chartered Surveyors (Rics) says.

In the latest stark warning about the housing market, Rics – which represents surveyors and estate agents – is calling on the Bank to limit house price inflation to rein in consumers' and lenders' expectations and give a clear sign of when the Bank would use its new powers to calm the market. This week, the organisation warned that house prices are rising at their fastest rate since their 2006 peak.

If the inflation limit was breached, Rics argues, the Bank's fledgling financial policy committee, which is in charge of safeguarding financial stability, could act.

If it believes a bubble is emerging, the FPC has the power to direct the banking regulator, the Prudential Regulation Authority, to force lenders to set aside more capital against riskier mortgages, for example, which could make high loan-to-value mortgages more expensive.

Joshua Miller, senior economist at Rics, said: "The Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases. Capping price growth at, say, 5% is one way of doing this."

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Rics' intervention comes amid growing evidence that the UK's housing market has started to take off, with rising consumer confidence and government stimulus schemes boosting lending and house prices. In August, the Halifax house price index showed UK homes were fetching 5.4% more than in the summer of 2012, and several property firms and estate agents have predicted that growth will top 5% by the end of the year.

Business secretary Vince Cable said this week that the chancellor should consider halting the second phase of his controversial Help to Buy scheme – which is due to begin in January and will offer taxpayer-backed mortgage guarantees – because of the risk of inflating a housing bubble.

Figures from the Council of Mortgage Lenders out on Thursday showed that the number of first-time buyer loans was up by 41% year on year, and almost £1bn was poured into new investment properties.

Meanwhile figures out on Friday from property firm LSL suggest house prices in England and Wales soared to a record high in August. The figures, which are based on all property purchases registered with the Land Registry, put the average price of a home at £233,776.

Rics said its proposed 5% cap had been chosen to take into account UK income growth, currently averaging around 3% a year, and the additional pressure on prices from a shortage of housing supply. However it said it was "not wedded" to the 5% level, and would be supportive of a "more robustly determined" figure.

Policies to tackle rising prices have been adopted in other countries, such as Canada, the homeland of the new Bank governor, Mark Carney. There mortgage terms were reduced, lending was restricted and more stringent credit checks were introduced.

Rics said greater transparency would add to the public confidence in this kind of action. Miller said a price rise cap "would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt."

Carney has said he is prepared to take action to prevent a housing bubble, a point he reiterated to the Treasury select committee on Thursday.

But any move to calm the market by forcing banks to put more capital aside against riskier mortgages, for example, could clash with Help to Buy, which is designed to encourage banks and building societies to offer loans to borrowers with small deposits.

Although the second leg of the scheme will not launch until next year, there are signs of a thaw in the market for high loan-to-value mortgages, with surveyors e.surv reporting that the number of loans granted to borrowers with a deposit of 15% or less had increased by more than 40% over the 12 months to August.

Article Source : http://www.guardian.co.uk

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Record number of estate agents raises fears of unsustainable housing bubble

ONS data shows 562,000 people work in real estate sector – the largest number since records began in 1978

Britain now has a record number of estate agents, official figures have revealed, underlining fears that the fledgling economic recovery is based on inflating an unsustainable housing bubble.

The number of people employed in "real estate activities" increased by 9.9% between March and June (the latest month for which data are available), according to the Office for National Statistics.

That was the fastest percentage increase in any sector of the economy; and a rise of 77,000 in the number of estate agents over the past year has taken the total number of people employed in the sector to 562,000, the largest number since records began in 1978.

Growing confidence in the outlook for the housing market has been a key component of the economic upturn that led the chancellor, George Osborne, to claim in a speech on Monday that the UK is "turning a corner".

Prices across the country rose by 3.5% in the year to August, according to the Nationwide, with much sharper increases in London and the south east.

However, with the most potent element of Osborne's Help to Buy scheme due to kick in next January, offering taxpayer-backed guarantees on homes worth up to £600,000, news of a jump in the number of estate agents will underline fears that the UK is on its way to another unsustainable housing boom.

"We're no longer a nation of shopkeepers, we're becoming a nation of estate agents," said Danny Gabay, director of economics consultancy Fathom. "I would certainly agree that the economy has turned a corner; my concern is about how sustainable this recovery will be, given that it is based on using government subsidies to encourage already over-extended households to take on even more debt to finance their consumption".

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said any recent increase in jobs among estate agents is likely to have been concentrated in the south, where the housing market upturn is most evident.

"I think it's early days across much of the country. It may be capturing some of the impact from London and the south east, but when I look at the comments from our members elsewhere in the country, I don't sense they're rushing to take on lots of new employees, or open new offices: it's a bit premature."

Article Source : http://www.guardian.co.uk

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Soaring house prices spread across UK as surveyors warn of another bubble

Poll shows fastest rise since late 2006 peak, with Rics saying Osborne schemes risk pushing prices to unaffordable levels

House prices are rising at their fastest pace for almost seven years, according to the latest survey to point to a property market on the rise.

Rising prices and growing demand have also driven a jump in the number of people putting their homes on the market, according to the Royal Institution of Chartered Surveyors (Rics).

Its survey echoed a report from Britain's largest mortgage lender, Halifax, last week that house prices were 5.4% higher than in the summer of 2012. Estate agents polled by Rics indicated the fastest rise in prices since their peak in late 2006 as government schemes such as Funding for Lending continued to improve access to mortgages.

Rics warned, however, of the risk of prices soaring to unaffordable levels, echoing commentators who have warned that George Osborne's property market schemes could spark another house price bubble.

The group said that although the market conditions were prompting more people to put their home on the market, demand still outstripped supply.

"During August, the number of would-be buyers increased yet again as increasingly accessible finance allowed more people to enter the market," the Rics report said.

Peter Bolton King, the Rics global residential director, added: "It's not surprising that more and more people are looking to sell their homes. Buyers are out there and prices are on the up so if you're looking to move it's a good time to do so. What we don't wish to see, however, is prices rise to such an extent that they become unaffordable.

"For the market to work properly, it's vital that property is both accessible and affordable, and we'll be monitoring the situation very carefully as the housing sector continues to recover."

Following government moves to improve access to mortgages, there have been reports of first-time buyers flocking into the housing market.

LSL Property Services, which owns estate agencies including Your Move, suggested last week that there were more than 26,000 first-time buyer transactions in July – an increase of 45% on the same month in 2012.

The Rics report said the Funding for Lending scheme and Help to Buy "appear to be part of the reason for the pick-up in activity".

The report's headline prices balance stood at 40, based on the proportion of respondents reporting a rise in prices minus those reporting a fall. That was the highest since November 2006 and compared with 36 a month earlier.

Rics said each region across the country saw supply increase in August as the recovery continued to spread from south-east England to other areas. The South West and the North East, in particular, saw the number of new homes coming onto the market rise significantly.

Rics added: "It seems that recent price rises are going to continue unabated."

The estate agents surveyed expect prices across Britain, on average, to increase by 2.2% over the coming year and by 4.4% in each of the next five years. At the start of this year, those respective figures were 0.6% and 3.4%.

The survey of 348 agents will intensify fears of unsustainable rises that will leave another generation saddled with huge debts.

Experts' concerns about another bubble centre on the Help to Buy scheme, which was introduced in April and provides equity loans for first-time buyers of up to 20% towards the cost of new-build properties worth up to £600,000.

The International Monetary Fund and others have criticised the scheme, which will be expanded in January to make the loans available to all buyers and all types of property up to the £600,000 limit.

Some of the estate agents surveyed by Rics predicted a boom as a result of the government schemes; others were more cautious about their impact.

"The second stage of the government's Help to Buy scheme in January 2014 could create a bubble," said Michael Brooker, an agent in Crowborough, East Sussex.

Others were less confident the price rises would last.

Julian Dyer in the Welsh town of Abergavenny, said: "The market has definitely perked up over the last 6 months, however the market seems very fragile, and I am not convinced that the upturn is sustainable. The government initiative to help builders does not seem to have worked in this area."

Article Source : http://www.guardian.co.uk

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