Further Weakness In UK Housing
Halifax House Price data has just been released in the UK, this figure is being watched closely this morning given the softness in the British construction and housing data earlier in the week. The month on month figure for February showed a -1.1% contraction versus a 2.4% rise in January. The 3 monthly year on year figure rose just 2.3% against a prior reading of 7.9%.
Britain’s Chancellor of the Exchequer, George Osbourne, referenced house prices in a speech last night. Echoing the Bank of England Governors remarks on Wednesday, Osbourne warned of the severely disjointed rise in prices between the south east of the country and elsewhere. The Chancellor cited foreign investment in the London area as being responsible for driving the growth in the southeastern property market and cautioned against drawing a conclusion as to the health of the construction sector based on this phenomena alone. Additionally, Osbourne claimed that the Governments ‘help to buy’ mortgage loan program was not feeding into house price growth, the Chancellor extended this scheme during his recent budget.
There appears to be a concerted effort between the monetary and fiscal authorities to explain the regional difficulties in Britain’s construction sector. A member of the Bank of England’s Monetary Policy Committee, Ian McCafferty yesterday also suggested that the UK housing market was showing signs of dis-function.
The fear of both the Government and the Bank of England is that there is a noticeable increase in talk of a housing bubble in the UK. The truth is that there may be early signs of a housing bubble in the more affluent London areas but that the rhetoric is being taken to describe the whole country. This is dissuading both potential homeowners and investors from buying property in the weaker areas of the economy. This week’s soft data capped by today’s sharp drop in the high profile Halifax Index may do something to cool the overheating London market.