It is still hard to figure out exactly where the market is because everything is distorted by the number of people who rushed into the market to buy before the stamp duty rise in April. If you ignore London, though, and look at prices across the UK, it is hard to make the case that prices are particularly overstretched. On average they are still below 2007 levels in real terms. In parts of Northern Ireland and the north of the UK prices are still down 30-40 per cent in real terms. Tell any seller of an imperfect house in Northumberland that he is in a property bull market and you will, I think, get little more than a bitter laugh.
At the same time it is worth remembering again that one of the main things that moves house prices up and down relative to GDP per capita growth is interest rates. Rising interest rates will eventually bring prices back down to near long-term averages (HSBC pulling the UK’s cheapest-ever fix earlier this week was interesting in this context, as are rising inflation expectations) but given that UK interest rates are still running at historic lows (Andy Haldane of the Bank of England puts global rates at a 5,000-year low) you could be forgiven for wondering not why UK-wide prices are so high but why they are so low. Read more…