Residential values saw increase in May
Contract award values within the residential sector in May were considerably higher than last year showing the continued strength of the sector.
According to the economic and structure and construction review, activity in the residential sector sustained its recent strength in May with the total value of contract awards £1.79 billion, based on a three month rolling average.
This is 10% higher than April and is also a 3% increase compared to April 2013 indicating the rise in activity experienced in the sector over the last 12 months.
The amount of units associated with residential contracts awarded dropped by 1.3% between April and May 2014, based on a three month rolling average, but were 19.2% higher than May 2013, confirming the upturn in the market.
The latest house price indices for May from Nationwide and Halifax showed that current prices were
11.1% and 8.7% higher than last year. Price rises, which are even more severe in London, are creating fears of a house price bubble and as such calls for controls to be put in place have been made.
Other factors however suggest that the market may be calming down as the Bank of England reports that mortgage approvals fell to a nine month low in April, and RICS reported that new buyer inquiries slowed for the fifth month in a row.
It is however unclear whether or not tighter restrictions in lending set out in the Mortgage Market Review are the cause. There has already been notable shifts from two of the UK’s largest lenders in the last month with RBS and Lloyd’s both cutting back lending on loans with high loan to income multiples.
The Help to Buy scheme, which is seen by many as a key contributor to the recent increase in house prices, has come under scrutiny with commentators with regards to when it will be scaled back.
The Bank of England has been reluctant to intervene in the housing market and its latest Inflation Report suggests that rising house prices are not its main concern. The housing market will continue to be a point of political debate in the coming months as the opposition suggests that it will scale back Help to buy should it win the next election. The increases in residential construction contracts however continue to be marked in Barbour ABI data this month.