House Prices: Record High For The UK

UK house prices hit a new record high in August, largely driven by soaring demand across London and south east England, official figures show.

The Office for National Statistics (ONS) recorded an increase of 3.8% in the 12 months to August 2013, up from a 3.3% rise in the 12 months to July 2013.

It measured growth as being stable across most of the UK - with a year-on-year increase of 4.1% for England over the period being driven largely by growth in London.

There was annual growth of 1.1% measured for Northern Ireland, 1% for Wales though a fall of 0.7% was recorded in Scotland.

It left the average property price in the UK at £247,000, the ONS said, meaning its measure surpassed a previous peak recorded in January 2008.

While growth in London and the South East (HKSE: 0726.HK - news) continued to drive the record performance for house prices, the pace of growth eased slightly over the month - possibly because of the summer holidays.

The housing market is expected to see the heat of demand from would-be buyers turned up further over the coming months, following the launch of the Government's new Help to Buy scheme, which offers state-backed mortgages to people with deposits as low as 5%.

RBS (LSE: RBS.L - news) , NatWest, Halifax and Bank of Scotland started offering loans under the initiative last week and have reported strong interest so far, while more lenders including HSBC (LSE: HSBA.L - news) , Barclays (LSE: BARC.L - news) and Santander (Madrid: SAN.MC - news) have also confirmed their plans to come on board.

Some sharp increases in property prices in recent months have fuelled fears that the country could be heading for a property "bubble", with the new phase of Help to Buy pushing up demand for homes at a time when the number of properties for sale is in relatively short supply.

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

A Treasury spokesman said of the figures: "We're encouraged to see signs that house prices are recovering from a low base alongside the wider economy.

"However, the Government understands that the housing and mortgage markets are yet to return to their long run levels, leaving too many people - especially first-time buyers - struggling to afford historically high level of deposits.

"That's why the Help to Buy mortgage guarantee is a vital tool to give young people the same opportunity to get a foot on the property ladder as previous generations."

Campbell Robb, chief executive of Shelter (BSE: SIPL.BO - news) , warned that the Government's efforts to kick-start the market could actually result in properties being pushed further out of some people's reach as house prices increase.

He said: "Our rollercoaster housing market may make headlines, but these days rising house prices don't have the feel-good factor, and for good reason.

"Nobody wants a return to the bad old days of house prices rising then crashing," he concluded.

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