The average cost of a home in the UK has risen to £250,000, the Office for National Statistics has emphatically revealed.
The ONS identified that the quarter million mark was breached in the latter stages of 2013, and alarmingly argued that property prices are now 1.6% higher than they were at their peak pre-recession levels back in 2008.
Their data was based on the quantity of mortgage completions over the course of last year, and also indicated that property prices rose by 5.5% during 2013.
The news will be a blow to consumers and prospective homeowners, who are required to pay a higher rate of 3% on stamp duty when spending £250,000 or more on property.
However, the ONSís data contradicts the figures released by the Halifax and Nationwide, who both gauged the average property to cost around £175,000 in their annual review of 2013.
This is despite the fact that both identified the total inflation in house prices during 2013 to be higher than the figure given by the ONS, which implies that the latterís estimate for the average property price at the start of 2013 was most likely significantly higher than that given by Nationwide or the Halifax.
Nevertheless, Howard Archer, chief economist at IHS Global Insight, argued that the statistics are supremely worrying and have upheld the ìconcern that a housing bubble could really develop in 2014″.
Mr Archer forecasted that property prices would soar by another 8% this year, and highlighted London as the area which could be the most problematic moving forward in the future.
House building calls continue
Despite Mr Archerís concerns, the ONSís figures display a huge disparity in the levels of price inflation in property across the country, with houses prices only rising by 0.5% in Scotland and 4.8% in Northern Ireland and Wales.
This compares to a significantly higher 5.7% in England, and 12.3% in London, where the likelihood of a ëhousing bubbleí has been persistently identified by housing organisations and economists alike.
Property campaign group Shelter argued that the ONSís figures was the latest piece of evidence that clearly displays that the UK property market is overheating, and called for the government to implement a series of house building programmes in order to bring down the demand to supply ratio that is artificially raising property prices.
“Until we build enough homes to keep house prices stable, more young people and families desperate to put down roots will see a home of their own become a distant dream,” said Shelter’s chief executive, Campbell Robb.
“Schemes like Help to Buy are only making the problem worse by inflating house prices further,” he said.
It can be argued that the merits of the government implementing a house building programme are immeasurable; supply would be able to catch up with demand, a greater number of medium and low cost property will be available to young workers, and a greater number of people could enter into employment via the programme and function in a beneficial manner for the future of the country.
However, the Institute for Fiscal Studies has sought to downplay the ONSís findings, arguing that in real terms, meaning house costs after inflation is taken in account, house costs only increased to a small extent in 2013.
The IFS cited that the property market is indeed improving and consumer confidence is on the rise, but nevertheless house prices are still 25% lower than their pre-recession peak.
London prices ëinvestor drivení
Bank of England governor Mark Carney also sought to downplay the ONSís findings, arguing that 2013 saw a revival in consumer confidence levels in the property market.
He also highlighted that the bankís recent removal of finance to mortgage lenders from their Funding for Lending schemes, and the new mortgage application criteria set to be enacted from April will act as natural balances to soaring demand levels for housing in the country, and rejected that implementing an interest rate rise now would be beneficial for preventing a ëbubbleí in problematic areas, such as in the capital of London.
Mr Carney identified that he had no intention of raising interest rates in the near future, despite the fact that property prices have soared by over 11% in the capital over the past 12 months, and argued that the factors that have been driving costs of housing up in London are out of the Banks hands as they come from foreign investment.
Mr Carney said: “Much of what’s driven in London, of course, is not mortgage-driven but is cash-driven.
“It’s driven, in many cases, by foreign buyers. We, as a central bank, can’t influence that.
“We change underwriting standards – it doesn’t matter, there’s not a mortgage. We change interest rates – it doesn’t matter, there’s not a mortgage, etc.
“But we watch it and we watch the knock-on effect.”
Mr Carneyís stance reiterates the argument made by the think tank Civitas and the EY Item Club last week, who called for the government to take action in order to prevent foreign investors artificially inflating demand and property prices in the capital by frequently purchasing expensive housing in London as a form of investment.
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