London home prices at new high on economic recovery, market stimulus
Asking prices for homes in London surged to a record this month, as the buoyant outlook spread to other parts of the country, according to real estate website operator Rightmove.
Prices climbed 2.1 per cent from February to £552,530 (HK$7.1 million), taking the annual appreciation to more than 11 per cent, the company said on Monday. Nationally, values rose 1.6 per cent to £255,962, also an all-time high.
Britain's property market revival has been encouraged by a strengthening recovery and a government stimulus plan known as Help to Buy, which allows people to buy a home with a down payment of as little as 5 per cent. Chancellor of the Exchequer George Osborne said on Sunday he would extend the programme for new homes to 2020 to spur construction.
"Spring is in the air and the country is finally on the move," said Miles Shipside, a director at Rightmove. "The mass property market is starting to unlock after years of being handcuffed by fragile consumer confidence and a lack of low-deposit mortgages."
Price growth in London last month was led by the outer boroughs, including Haringey and Barnet in the north, Rightmove said. The most expensive district, Kensington and Chelsea, saw values drop 2.4 per cent, while Westminster recorded a 2.3 per cent decline.
The report also showed a 10 per cent annual increase in the number of properties coming onto realtors' books this month. While that would ease some price pressure, "structural shortages remain" in London's housing supply, Shipside said.
The Treasury said Britain would invest a further £6 billion in Help to Buy and that the additional funding would help support the construction of 120,000 properties. With house prices rising, more than 80 per cent of economists in a Bloomberg survey published on Friday said Osborne should curtail Help to Buy in the budget to be released today. The plan was introduced in April 2013 and a second version began in October last year.
Morgan Stanley analysts including Huw Van Steenis have argued the opposite, saying in a March 10 note that Britain was building too few homes and Help to Buy was a "key catalyst" for construction.
"We think the market still underestimates how critical [Help to Buy] 1 and 2 are proving for construction, credit and broader recovery," they said. "Side effects are less than critics feared."
Nationally, asking prices for residential property rose 6.8 per cent in March from a year earlier, Rightmove said. Values are now above the £250,000 threshold that increases the stamp-duty tax on property sales to 3 per cent from 1 per cent, and Rightmove said a more incremental scale might be "opportune and fair".
"Depending on the chancellor's need to balance the books versus the desire to please target voters, he may be tempted to make some further tax changes," Shipside said.