Housing prices in London rose 10 percent in the last 12 months to new record highs and exceed by 8 percent the peak reached in 2007 before the global financial crisis, according to data released Friday by the mortgage lender Nationwide.
The average price of homes in London rose by £33,133 in the last 12 months, a rise that exceeds the average gross wage in London, £30,471, according to CNN Money.
UK housing prices collapsed by 20% during the crisis, but currently exceed levels of pre-Lehman Brothers bankruptcy due to low interest rates, improved confidence in the economy and significant support provided by government to stimulate mortgage lending.
New fears appeared on the emergence of a new speculative bubble in the British housing market.
Finance Minister George Osborne urged the Bank of England to assess annually the subsidy program – “Help to Buy” for the purchase of housing, according to a Treasury spokesperson. Initially, the program was subject to evaluation every three years.
The program offers five years without paying the interest for buyers seeking a loan to purchase a new home with 5 percent down payment. Since January, the government plans to expand the program to assist buyers interested in buying existing homes priced up to £600,000.
Bank of England may recommend the government to reduce the ceiling if it finds that the market is overheating. The financial policy committee of the Bank recently announced that it monitors “emerging vulnerabilities” that appeared on the residential market.
As prices rise in London, houses are cheaper and rise at a lower pace in the rest of the United Kingdom. The national average price of housing is £170,918, up by 4.3 percent compared to last year.
One reason for the higher housing prices in London is the wealthy investors from overseas that want to buy houses in prime locations.
The interest rates will be kept at record low levels for the next few years by the Bank of England, which help buyers to buy houses at a low mortgage rates.
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