They rose by 0.8% in July, taking the annual increase to 3.9% amid signs that the UK economy is finally delivering convincing growth with some economists saying that it is approaching the point at which the recovery could become self sustaining.
The report shows that prime central London property values climbed by 0.5%, taking the annual increase to 7% but average rents in prime central London fell again in July, by 0.7%.
Optimism on house prices continues to rise and it seems that the pick up in economic activity is not purely based in the south, with a closely watched indicator of business recently indicating that activity in the North West hit a record high during the summer.
To cap it all, the Bank of England revised up its forecasts for economic growth in 2013 and 2014 to 1.4% and 2.5%, up from 1.2% and 1.7% respectively.
‘There have also been several positive developments for home owners and potential buyers, not least Bank of England Governor Mark Carney’s forward guidance on interest rates,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.
‘The idea that Dr Carney, would issue some reassurance that interest rates would stay low for a year or two, had been trailed for quite a while. In the event, Dr Carney said that rates would not be raised until the unemployment rate fell to 7%, it is currently at 7.8%. Economists expect this to happen at some stage in the middle of 2016,’ she explained.
However, one of the key caveats to this 7% threshold is that if inflation looks as if it will rise above 2.5% over the medium term, usually considered to be in 18 to 24 months’ time, the Bank can step in to raise rates earlier,’ she added.
She pointed out that Dr Carney also made an interesting observation on Help to Buy, the multi billion pound government scheme designed to boost new housing construction, indicating that there may well have been some discussion about extending it beyond its initial three year term.
The first tranche of Help to Buy has been dubbed an instant hit by the housing minister, with 10,000 new home reservations in first four months of the scheme. ‘Low mortgage rates and the Help to Buy effect, have certainly helped boost optimism over the outlook for house prices. Demand for home loans has picked up, and this is reflected in data from the Council of Mortgage Lenders showing the number of loans granted to first time buyers in June this year rose by nearly a third compared to June 2012,’ said Gilmore.
‘House prices have also started to show some positive momentum, although it is worth noting that the average UK house price increase is more modest than...
Most Popular Slideshows
- Top Ten Richest Americans [PHOTOS]
- Is Orlando Bloom’s Wife, Miranda Kerr Singing Love Songs for James Packer? [WATCH VIDEOS]
- 'Jelena' Romance: Selena Gomez Shares her Most Shocking Date with Justin Bieber Involving $3M- Diamond [PHOTOS/VIDEO]
- Watch Out, Robert Pattinson! Kellan Lutz Reveals He Turned Down The Role Of ‘Twilight’ Lead Edward Cullen [PHOTOS/ VIDEOS]