UK May Home Prices Surge By Most Since 2002
Two weeks ago we asked, rhetorically, "Whose Housing Bubble Is Bigger?" and showed the April home price increases in the UK and China:
Today, we have our answer. As the WSJ reports, "U.K. house prices rose at the fastest monthly pace in almost 12 years and to the highest level since before the global credit crisis in May, a survey showed Thursday, as demand for homes continues to outpace supply despite tougher new mortgage rules."
Mortgage lender Halifax said the average value of homes purchased by its own mortgage customers hit £184,464 ($308,922) in May, the highest price since April 2008. That marks a 3.9% increase from April—the largest monthly gain since October 2002—and an annual gain of 8.7%.
"Housing demand is still strong and continues to be supported by a strengthening economic recovery," said Stephen Noakes, mortgage director at Halifax. "Consumer confidence is being boosted by a rapidly improving labor market and low interest rates, although growth in average earnings still remains weak."
Actually housing demand is mostly supported by offshore - Chinese, Russian and Middle-east - hot money. That and the BOE's loose monetary policy of course, policy which won't be changing any time soon, especially following today's Bank of England announcement keeping rates unchanged.
However, if this bubble continues soaring as it has, the BOE will have no choice but to step in, now that its overheating housing market is outperforming even that of China.
Reports that house prices are continuing to surge will likely be a key discussion among Bank of England officials at a financial policy meeting later this month.
In April, the Mortgage Market Review rules came into effect with lenders having to adhere to new stricter lending rules.
There have been some signs that the new rules may have slowed mortgage lending a little as figures from the BOE Monday showed mortgage approvals slipped for a third straight month in April. However, the appetite for property in the U.K. remains undiminished and those who are able, are continuing to pay the price required to buy a home in the U.K.
For now, however, the handful of billionaires who own the bulk of luxury UK housing continue to be the biggest benefactors.
And in other news, French economists continue to profit from book sales wondering why the rich keep getting richer...
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