Cheap money lifts UK house prices

UK house prices have risen at their fastest pace in 17 years.

Nationwide reports that UK house prices rose by 2.1% in April from the month before, the biggest jump since February 2004. Prices have gained 7.1% in the past year. The upswing should keep going, says Andrew Wishart of Capital Economics. Survey data from the Royal Institution of Chartered Surveyors shows strong sales and limited stock for sale. Web searches for homes hit a six-year high last month. 

This has been a boom like no other, says Roger Bootle in The Daily Telegraph. House prices fell in real terms during the last four UK recessions. This time they have risen thanks to extensive government support and ultra-low interest rates. The ratio of average house prices to average earnings is now close to its 2007 high. Does that mean we are heading for a crash? Probably not. Households are finding mortgage payments manageable thanks to rock-bottom interest rates. A property slump looks unlikely before the Bank of England tightens the monetary screws. 

The average house price was rising by £200 a day last month, notes The Observer. Signs of a strong UK recovery are to be welcomed, but it’s a shame it had to happen in the housing market. For all the talk of building back better, the government has instead served up a “bog-standard recovery built on cheap money, property speculation” and debt. Housing market growth “is the wrong sort of growth”. 

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