Read the original article at the FT.com here.
House prices are up by an annual average of 7.7 per cent, according to a Halifax survey, as ministers face warnings of the return of a “rollercoaster” market.
The mortgage lender said on Friday that prices climbed 1.1 per cent in November, the 10th successive monthly rise.
Its findings came a day after the Office for Budget Responsibility ramped up its official house price outlook. The OBR said prices would peak in real terms in 2018 at 3 per cent below the height of the housing bubble in 2007 – just before the credit crunch.
“”The bubble that burst in 2008 is being slowly reinflated”, said Ben Harris-Quinney, chairman of the Bow Group, the rightwing think-tank.
Treasury officials said the higher forecasts were nothing to be alarmed about, given that house prices had historically risen much faster than inflation. Ministers believe that a controlled recovery in prices could induce a“feelgood factor”.
Financial regulators have imposed tougher restrictions on mortgage lending than in the previous bull market.
But some people, including Vince Cable, the business secretary, are uneasy about a surge in house prices if wages continue to flatline.
The OBR has said the strong growth in residential investment “may pose risks to the sustainability of the recovery over the medium term”.
In parts of London and the southeast, house prices are already much higher in nominal terms than in 2007.
Critics say the government’s Help to Buy mortgage support scheme will accelerate house price growth without creating new supply.
Campbell Robb, chief executive of the charity Shelter, said that ministers’ excitement would not be shared by families and young people facing the prospect of “another huge surge in house prices” while wages remained stagnant.
“Unless house prices are stabilised, the grim reality is that our rollercoaster property market will lead to the prospect of home ownership slipping even further away from even more of us,” he said
Rachel Fisher, head of policy at the National Housing Federation, the social housing group, said the new OBR forecast was a reminder that home ownership was moving further “out of reach”. She added: “It will continue to do so unless we build considerably more homes.”