Rob Wood, chief UK economist of Berenberg Bank said the 2.4% growth month-on-month growth reported by Halifax this week was just one of many signs pointing to rising momentum.
He added: “The bank of England should [also] stop talking about being alive to the housing risks and do something about them, by using its macroprudential tool-kit. Ultimately, a rise in interest rates may be needed to combat the risks. We expect the first hike in Q1 2015 with a 30% change of a Q4 2014 rise.”
He added that with house prices rising 9.4%, year-on-year, according to the Nationwide, the RICS survey consistent with 15%+ house price inflation and annual mortgage approvals up 42% in January, the market is not subdued.
Wood added: “It is a national recovery – all but three regions are recording 6%+ annualised house price inflation according to the Nationwide index – and is likely to continue, boosted by low interest rates and government stimulus.”
“Relative to earnings or consumer prices, houses are cheaper than at the 2007 peak. But the height of a bubble is not a sensible comparison. Low interest rates, rising confidence, government stimulus and improving wage gains will keep the market accelerating. Estate agents price inflation expectations are at a 10 year high,” he said.
Mike Jones, Lloyds director of intermediaries took a different view and denied Help to Buy was creating a bubble in the London market this week in his blog for Mortgage Solutions.
“Whilst London has led the housing market recovery during 2013, Help to Buy 2 and other products have led to a broadening of the recovery and indeed our evidence shows that 8 in 10 applications have been from borrowers outside London and the South East. The London market is driven by a number of factors, but Help to Buy 2 isn’t one of them.”
In a statement on the budget today, RICS called for the government to regionalise the Help to Buy scheme, which it said ‘would create a more sustainable housing market going forward.’
