"The housing market is continuing to gather momentum on the back of further solid gains in employment, record low mortgage rates and rising confidence"
- Robert Gardner, Nationwide's Chief Economist
Britain's housing market can become a serious headache for the government this year, as even despite recent pledges to address constantly rising property prices, values soared again in January, fuelled by the return of first-time buyers. According to the U.K. largest building society, Nationwide, prices advanced 0.7% this month on a monthly and 8.8% on a yearly basis. Despite a slight slowdown from a month earlier, annual growth picked up 0.4%. Still, the values remain almost 4% below their pre-crisis peak. January's reading marks a 13th straight monthly rise and put the three-month rate of inflation at 2.9%.
A significant increase in the number of first-time buyers partially reflects stronger performance of the wider economy, especially taking into account the fact 28,000 new jobs were added in the three months to November– the largest gain since records began. At the same time, this week's GDP report boded well.
While a possible bubble can derail economic growth, Mark Carney explains a rally in house prises as property market was catching up after a slowdown during the financial crisis. Moreover, according to his projections, prices will keep rising robustly until the middle of next year.
© Dukascopy Bank SA