UK Recovery Is Strong - IMF Staff Report

The IMF recently published a staff report showing that the UK economy is growing quickly and the growth is expected to continue. The recent growth has been stronger than expected and the predictions are that growth will continue to be above expectations at about 3% rather than the 1.5% predicted earlier. Growth at the start of the recovery was based on consumer spending and an increase in consumer confidence along with easer credit conditions. Growth is now also due to more business investment as the confidence has spread from consumers to businesses.

The recovery is expected to continue but there are always risks. Domestic risks include uncertainty about future productivity growth and worries about financial risks coming from the housing market. Externally, the unwinding of unconventional monetary policies in the US and weak growth in both emerging and advanced economies and geopolitical tensions are seen as the areas of most risk.

The UK housing market has seen house prices grow very quickly in London and the rest of the UK as well. Rapid house price inflation can lead to serious risks for buyers who borrow more than they can afford leaving them vulnerable to shocks to interest rates or incomes.The authorities have already taken some steps to contain the financial risks. The first line of defence was the 'macroprudential' measures including loan affordability and limits to the share of new mortgages that feature high ratios of loans to incomes. These measures may take some time before they begin to have an impact. The effects will have to be monitored and settings adjusted accordingly if required. Inadequate supply is the main driver of the increase in house prices. Unnecessary constraints on planning should be lifted to ensure the ax system encourages the most appropriate use of land and a consensus reached to relieve the supply problem.

Monetary policy should remain accommodative for now and should support the recovery at least until signs that inflation is rising appear or that costs are increasing above productivity growth.

Strong Increase In House Prices Across UK

House prices in the UK increased by 10.5% in the year to May 2014, from 9.9% to April. London showed the highest level of growth with a record house prices increase of 20.1%. The South East (9.6%) and the East (8.6%) also showed good increases. London and the South East excluded, house prices increased by 6.4% nationally.

First time buyers house prices increased by 11.3% over the year to May from 10.7% in April. The average price for a house in May for a first time buyer was £202,000. Former owner-occupier buyers prices increased by 10.1% to May 2014 from 9.5% in April. The average price paid by former owner-occupiers was £301,000.

Prices paid for new build homes during the year to May increased by an average of 6.9% and the average price for new dwellings in May was £246,000. Pre-owned dwellings prices increased by 10.7%, from 10.4% to April. The average price for a pre-owned dwelling in May was £263,000.

House Prices Higher Than August Last Year

House prices in the UK were 8.3% up on August last year and 0.7% up on last month according to the DCLG. The average price of a house in the UK in August was £213,116. Prices in creased in England, Wales and Scotland but fell in N.Ireland. First time buyers were paying 8.2% more than last year and former owners were paying 8.3% more. New property prices were 8.6% more and pre-owned property was 8.3% higher than August last year.

House Prices Up 10.1% On Last Year

The House Price Index (HPI) from the Department for Communities and Local Government (DCLG) for April 2010 went up by 10.1% between April 2009 and April 2010 and 0.4% on March. The average house price was £207,516 in April 2010 and the all dwellings index was 174.4.

Annual average house prices in England went up 10.9%, in Scotland 2.2% and in Wales 11.3% but N.Ireland house prices fell by 8.9%. First time buyers paid 12.2% more than a year ago. Average prices for former owner/occupiers were 9.3% higher. New properties were 7.6% more than last year and pre-owned houses were up 10.3%.

House prices rose in all regions of the UK except Yorkshire and Humber where prices fell 0.5%. East Midlands saw the biggest increase with a rise in prices of 2.7%. Over the year to April all regions have seen an increase in house prices. The largest increases were in London where there were price rises of 16.8%.

The average price for a house in England in April was £214,863, in Scotland £162,392, in Wales £151,079 and in N.Ireland £163,201. The English region with the highest average house price was London. The North East was the lowest with £139,595. The regions with an average house price above the national average were the East of England, London, the South East and the South West.

House Prices Up 7.4%

UK house prices up 7.4% on February 2009 compared to 6.2% last year and 0.1% lower than January. The index (HPI) stood at 171.4. The mix-adjusted average house price in UK was £204,359 in February 2010 compared to £207,825 last year. UK house prices up 2.9% in the quarter ending February and 3.4% higher than last quarter. First time buyers annual average price in February 2010 was 9.3% higher than last year. Former owner occupiers annual average price was 6.6% higher than last year. Average annual house price for new houses was 3.9% higher. Average house price for pre-owned houses was 8.2% higher.

There was an increase in house prices in all countries of the UK except N.Ireland in the year to February. In England the increase was 7.9%, in Scotland 4.2% and in Wales 4.7%. In N.Ireland house prices fell by an average of 8.3% on February last year.

In the regions the mix-adjusted average fell in all regions except the North-East. The annual house price changes in England were lowest in the North-East at 3.5%, 3.9% in the West Midlans, 5.1% in Yorks and Humber and the East Midlands, 5.3% in the North-West, in the South-West it was 7.5%, 8.5% in the East, 10% in the South-East and highest in London at 10.6%. House prices in London averaged £321,289 and the North-East averaged £137,523. The average mix-adjusted house price for England was £211,299, Scotland £167,865, N.Ireland £167,832 and Wales £159,865. The South-West, East, South-East and London were above the UK national average of £204,359.

The average price paid by first time buyers was £149,490 and by former owner occupiers £238,185. Tne average price paid for pre-owned properties was £206,142 and new properties £181,783.