House price surge fuels feelgood fear

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The Independent Online
HOUSE PRICES have surged more than 8 per cent over the past year on the back of a sharp rise in the summer, Government figures showed yesterday. Although the boom was led by London, the North showed a substantial recovery, with Hartlepool topping the table with a 20 per cent rise despite having the highest unemployment rate outside the capital.

The average home in England and Wales now costs pounds 90,068, which is 8.13 per cent higher than the pounds 83,299 recorded a year ago, the Land Registry said. London prices rose 12.3 per cent.

The figures, based on actual sales, the most reliable indicator, revealed a surge in the number of transactions. This rise - and the fact the boom is spreading to the North - will weaken two key arguments of those who say there is no threat of a repeat of the boom-bust era of the late Eighties.

The figures, which compare prices in the three months to June with the similar period in 1998, showed prices rose in every region, the south- east up almost 9 per cent and the south-west 7.2 per cent.

But the West Midlands rose 6.7 per cent, the North 6 per cent, Yorkshire & Humberside 4.4 per cent and the North West 3.2 per cent. In Hartlepool on Teesside the price of the average home jumped 19.7 per cent to pounds 55,082 from pounds 45,983, although the number of sales dipped 27 per cent. Latest figures 13.6 per cent of people are jobless and claiming benefit.

The highest gain was in Ceredigion, west Wales, which enjoyed a 23.4 per cent surge to pounds 69,605 from pounds 56,386. In London the top performer was Merton where prices rose 18.9 per cent to pounds 148,563 from pounds 124,935. The boom was fuelled by a 6 per cent rise in the three months to July compared with the previous quarter, more than four times the 1.3 per cent recorded in March. The March data showed prices actually fell by up to 4 per cent in eight regions, North, Wales, Yorkshire & Humberside, East and West Midlands, north-west, south- east and East Anglia.

The Land Registry data confirms the findings of surveys from the largest lenders, Nationwide and Halifax. The latest Halifax survey showed prices rose 2.2 per cent last month, the fastest for more than six years, giving an annual rate of 8.2 per cent up on a year ago, the largest increase since December 1996.

A house-price boom is a worry because it adds to the "feelgood factor" which drives up consumer spending. This reaches dangerous levels when homeowners remortgage their properties to turn their gains into cash for a spending spree.

The Bank of England, which sets interest rates, this month altered its assumption about house-price inflation. It now thinks prices will rise at twice the level of wages rather than in line as previously thought.

nPolicies promoting home ownership may not be the best way to encourage people to move home and seek work, say researchers at the University of Essex. They found those with a mortgage had lower mobility than council or private tenants.