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House prices hit record high in August


The Office for National Statistics (ONS) recorded record house prices in the month of August, as their house price index eased past the previous record set in January 2008, before the UK entered recession.

The house price index used by the ONS works by measuring the mortgage deals used to finance property purchases over a certain period of time, and figures for August produced a score of 185.8; higher than the previous record of 185.5.

However, we are continuing to see a trend where prices in parts of the country, mainly the South-East, are rising much faster than other parts of the UK. While the average price of a flat or a house in the UK now stands at £270,000, prices in London have risen by a massive 8.7pc in the last 12 months. The next highest regional rise is in the East Midlands, where prices have risen by 3.8pc.

Last year the Government launched the Funding for Lending scheme, making credit cheaper for consumers looking to borrow money. Another Government scheme, Help to Buy, was expected to be launched at the beginning of 2014, however the scheme was made available to consumers earlier than expected in October.

Critics of the schemes have voiced concerns over the possibility a housing ‘bubble’ caused by increased market activity. A bubble would occur if prices were driven up aggressively by increased competition for available houses, meaning that the effects of any schemes designed to boost the market would be cancelled by the fact that the affordability of homes would be out of reach to most.

Campbell Robb, chief executive of Shelter, said: “Our rollercoaster housing market may make headlines, but these days rising house prices don’t have a feel-good factor, and for good reason. Nobody wants to return to the bas old days of house prices rising then crashing”.

However, most experts agree that there is still a long way to go in the overall recovery, and that ultimately it is rising prices in the South-East that are putting the national average where it is.

Howard Archer from IHS Global Insight, said: “While the strength of house prices in London is becoming an increasing concern and is pushing up the overall national increase in house prices, we are currently a long way off from an overall housing market bubble emerging”.

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