The highlights from the report are:

  • UK house prices increased by 0.6% in February
  • Prices were 9.4% higher than in February 2013
  • Prices are around 3% below 2007 peak

 

What is driving these near double digit increases?

Wages are still relatively depressed and the mortgage market although freeing up still requires substantive deposits for most buyers. The government funding schemes are clearly making an impact but the causal factors of higher house prices are structural.

A total of 109,500 new homes were built in 2013, which is about half the rate needed to house the projected number of households that are expected to form in the years ahead. In addition the UK saw net inward migration in 2013 of over 200,000 people.

 

Long term house price trends are not quite so dramatic but reinforce again the fundamental shortage of supply over demand. With free movement within the EU and Eurozone difficulties driving a two speed economic Europe for years to come, this trend is only likely to be exacerbated by fresh waves of inward migration under the EU free movement rule, that is unless PM Cameron is successful in persuading Chancellor Merkel that change must be delivered, which doesn't seem likely any time soon.

There is no cost free path to growth, high employment and quality public services. The UK has been a net beneficiary of inward migration, supplying skill shortages, increasing tax receipts, and building productive capacity. House price inflation is a problem of supply and UK housing policy will need to adapt if it is not to impede wider economic and social objectives.

There are parallels and lessons for Jersey here.  Long term prosperity requires long term planning and a carefully crafted coordination of population and housing policies if disruptive spikes in house prices are to be avoided.