Saturday, February 24, 2024

UK house price growth accelerates as demand beats supply

house price

The RICS gauge of house prices climbed in April to +75 from +62 in March

A measure of British house price inflation hit its highest level in four decades in April as buyers raced to benefit from an extended tax break just as sellers retreated from the market, a survey showed on Thursday.

The Royal Institution of Chartered Surveyors’ (RICS) gauge of house prices – which reflects the proportion of surveyors reporting price increases – climbed in April to +75, its highest level since the 1970s, from +62 in March.

Other indicators have also shown that a surge in the housing market was given fresh momentum by finance minister Rishi Sunak’s announcement on March 3 that he was extending temporarily a cut to a tax on property purchases.

Mr Sunak also announced a new mortgage guarantee scheme for first-time buyers who cannot afford large deposits.

RICS said new buyer demand was positive across every region for the first time this year. But new instructions from owners looking to sell slumped to -4 from +21 in March.

Housing supply, or more pertinently, the shortfall in supply relative to demand is the key theme coming through loud and clear, Simon Rubinsohn, RICS’s chief economist, said.

While it may be simplistic to assume that higher numbers alone can redress the affordability issue, particularly in a low interest rate environment, an uplift in delivery does have a role to play, he said.

Prime Minister Boris Johnson’s government said on Tuesday it would create a simpler and faster planning system to speed up the construction of new homes, a frequent promise of British governments.

Sunak cut the stamp duty purchase tax last year as part of his emergency measures to help the economy through its coronavirus slump.

RICS said there were signs that the renewed rush to buy homes would ease off when the tax break is scaled back in June and ends completely in September.

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