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No Pause In UK House Price Growth

James Boston
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No Pause In UK House Price Growth

The Construction Purchasing Managers Index in the UK is showing a significant gain for the month of June. At a reading just announced of 62.5 this has come in well ahead of May’s 60.0 and easily beat the market consensus estimate for 59.5.

Also trending higher in the UK this morning is the latest House Prices survey from Nationwide. Year on year to June, house price inflation in the UK is now running at 11.8% on a non-seasonally adjusted basis. The rate of price growth expansion has once again increased, last month’s reading was 11.1% and markets were ready for a reading of 11.2% in June. The month on month number increased 1.0%, this time on a seasonally adjusted basis, the expectation was only for a 0.6% rise based on the May pick up of 0.7%.

A closer look at the house price situation reveals that home values in the capital have risen on average by over 25% during the past year, some parts of the region are reporting house price gains just shy of 40%. All regions of the country are reporting house price expansion, ranging from London’s boom to more modest figures such as 5.4% in Scotland and just over 8% in the Northern Ireland area.

Last week the Bank of England’s Financial Policy Committee (FPC) published a series of recommendations to cap the amount of high value mortgages lenders could offer. A measure such as this would have the effect of dampening growth at the higher end of the market, i.e. London as this is where high value mortgages are most predominant.

Today’s figures however reveal that despite runaway growth in the capital there does appear to now be an acceleration in regional house price growth also. This new development perhaps frees up the Bank of England to use the more broad monetary policy tool on house prices and can only serve to bring forward the date for a likely interest rate hike.

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