UK house prices see modest rise, says Nationwide
- 30 May 2013
- From the section Business
UK house prices recorded a "modest" rise in May, increasing by 0.4%, according to the latest survey from the Nationwide building society.
It said the increase provided further support for "the view that the housing market is gradually gaining momentum".
The annual rate of price growth rose to 1.1%, the fastest pace since November 2011.
The increases mean that the average house now costs £167,912, the Nationwide said.
Robert Gardner, Nationwide's chief economist, said a number of factors were likely to have contributed to the recent pick-up in activity.
"There has been an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme," he said.
"With the UK returning to growth in the first quarter of 2013, the improvement in wider economic conditions may also be playing a role in boosting sentiment."
The Funding for Lending Scheme allows banks to borrow money at a discount from the Bank of England, providing they can show they have passed it on to customers in the form of loans.
Mr Gardner said that this had increased the availability of mortgages and pushed down rates.
Warning of bubble
As a result, prices in the last three months compared with the previous three months were up by 0.4%, and have been growing according to this measure since October 2012.
Mr Gardner said that property sales were also up, running at about 5% higher each month this year than the average monthly level in 2012.
The number of mortgages approved, which can be expected to feed through to sales, also picked up at the start of the year, he said.
He expected the market to continue to gain momentum, partly owing to government support for more credit.
However, the government's Help to Buy scheme has come in for criticism, with claims that this would simply create another housing market bubble.
Under the Help to Buy Scheme, borrowers are able to take out an equity loan from the government, which will enable them to put down a deposit of just 5% on a property. That scheme began on 1 April.
Under the second scheme, starting in January 2014 and due to run until 2017, the government will guarantee up to 15% of a mortgage on homes worth up to £600,000. The scheme will be used to support £130bn of mortgages.
Critics have included the outgoing governor of the Bank of England, Sir Mervyn King, who warned that the scheme must not become permanent.
"I'm sure that there is no place in the long run for a scheme of this kind," he told Sky News in a recent interview.
On Wednesday, the OECD said that while new housing measures were likely to encourage residential investment and supply, there could be "upward pressure on house prices" if builders did not build more homes.
The Nationwide figures are based on its own lending data. Its rival, the Halifax - which is part of the Lloyds Banking Group - recorded a 2% average annual rise in prices a month ago. The two lenders calculate their year-on-year figures slightly differently.
Karelia Scott-Daniels, managing director of buying agents, Manse & Garret Property Search, said: "Much of the momentum is coming from London and South East England, and there is a danger that this is masking the stagnation in some other regions.
"But for properties that are priced correctly, there is no shortage of buyers."
Other commentators were more sceptical about Nationwide's conclusions.
"The rise in house prices recorded by the Nationwide in May could further boost the growing sense of optimism regarding the housing market. But the fundamentals are still weak, and we think much of that optimism is misplaced," said a spokesman for Capital Economics.
Data from the Land Registry has shown that price changes have varied widely across the UK.
Figures published on Thursday, covering England and Wales, showed that house prices rose by 6.2% in the 12 months to the end of April in London, and by 1.4% in the South East of England.
However, the North East of England saw average price falls of 5.7% and there was a drop of 3.7% in the North West of England over the same period.
The annual increase across England and Wales was 0.7%, the Land Registry said.
These rises were dwarfed by the increases seen recently in the US.
US house prices in March were up 10.9% from a year earlier, the biggest rise in nearly seven years, according to the S&P/Case-Shiller index which was published on Tuesday.