UK home value gauge hits four-decade excessive

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© Reuters. FILE PHOTO: Construction workers build a new home in Aylesbury, UK August 6th 2020. REUTERS / Matthew Childs

LONDON (Reuters) – A measure of UK house price inflation hit its highest level in four decades in April, as buyers took advantage of an extended tax break as sellers pulled out of the market, a poll on Thursday found.

Real estate prices by the Royal Institution of Chartered Surveyors – which reflect the proportion of surveyors reporting price increases – rose from +62 in March to +75 in April, their highest level since the 1970s.

Other indicators have also shown that a surge in the property market was given new impetus by Finance Minister Rishi Sunak’s announcement on March 3 that he was temporarily cutting a tax on property purchases.

Sunak also announced a new mortgage guarantee system for first-time buyers who cannot afford large deposits.

For the first time this year, demand for new buyers was positive across all regions, according to RICS. But new instructions from owners looking to sell fell from +21 in March to -4.

“Housing supply, or more importantly, lack of supply versus demand, is the main theme that comes out loud and clear,” said Simon Rubinsohn, chief economist at RICS.

“While it may be easy to assume that higher numbers alone can solve the affordability problem, especially in a low interest rate environment, increasing delivery terms does matter.”

Prime Minister Boris Johnson’s administration on Tuesday said it would create a simpler and faster planning system to expedite the construction of new homes, a common promise made by UK governments.

Sunak cut stamp duty last year as part of its emergency measures to help the economy through the coronavirus slump.

The demand for larger houses after the lockdown experience has also led to an increase in demand since last spring, a phenomenon seen in other countries as well.

According to RICS, there were signs that the renewed rush to buy homes would ease if the tax break is scaled back in June and fully ends in September.

Only 12% of those questioned in their survey assumed that sales volume would increase in the next year.

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