Forex »

UK House Prices Continue To Rise

Share on StockTwits
Published on
UK House Prices Continue To Rise

British house prices are continuing to power ahead according to today’s Halifax House Price data from HBOS. The month on month rise in April was a significant 3.9%, this is a reversal of the -0.2% dip experienced in March and a large outperformance of the 0.7% market expectation. The three monthly year on year reading is also higher at 8.7% compared to the previous 8.5% and a 7.4% market expectation.

The European Commission (EC) yesterday cautioned the British authorities over the runaway cost of housing in the economy. The Commission called for tax reforms to dampen the rising market, including a new tax on high valued homes and a restructuring of the council tax, which it claims is based on house values from the 1990’s. British politicians rejected this advice, not so much because it lacked merit, but more likely because the establishment parties are still smarting after the recent European parliamentary elections.

The Bank of England (BoE) has already admitted that the runaway housing market poses the biggest threat to the British recovery. House price rises are bearing no reflection to the more moderate rises in incomes, this is particularly the case in the capitol and surrounding affluent areas. A concern of the BoE’s Monetary Policy Committee is that individuals are overburdening themselves with debt in a stretch to afford high priced homes, this makes these individuals particularly vulnerable to the effects of an interest rate rise. This group of highly stretched home owners is growing in number and the authorities recognize the need to take cooling action.

The BoE will find it difficult to raise the base rate with the sole intention of tempering the housing market. This initial attempt to dampen rising property prices in the UK is likely to be made by the Financial Policy Committee (FPC) which has more precise policy instruments at it’s disposal. The Next FPC meeting is on June 17th.

Share on StockTwits

What others are reading on Finances

Sorry. No data so far.

Iron FX 1.11156/1.11128 2.8
XM Markets 1.09948/1.09928 2
FxPro 1.10184/1.10171 1.3
FXCM 1.13943/1.13912 3.1