House prices rising quicker than average earnings

House prices are rising at nearly ten times the pace of average earnings after Halifax today said record low interest rates and Help to Buy were sending demand through the roof.

House prices are rising at nearly ten times the pace of average earnings after Halifax today said record low interest rates and Help to Buy were sending demand through the roof.

Prices in November hit £174,910, up 1.1% on October and 7.7 per cent on the same month a year ago. The typical house is now swapping hands for £174,910, up £13,577 on a year ago, a rise of £37 a day.

Average salaries are only increaing at 0.8% a year.

Halifax housing economist Martin Ellis said: "Stronger demand, combined with an insufficient increase in housing supply, has resulted in increases in house prices accompanying higher activity this year. Low interest rates, improvements in consumer confidence and official schemes, such as Funding for Lending and Help to Buy, all appear to have boosted demand."

Official forecasts released during yesterday's Autumn Statement reveal that house prices in affluent London boroughs had already surpassed their 2007 levels.

Fuelling fears the market is over-heating, The Office of Budget Responsibility added that house prices could jump by more than 20% between 2013 and 2018, at least in London and south-east England. This is expected to trigger a £12.6 billion bonanza for the Treasury through extra stamp duty receipts.

The price rise seen in November was the tenth successive monthly increase. Halifax claimed the average price was still some 12% below the peak seen in August 2007, just before the credit crunch hit Britain.

Mr Ellis also said: "Continuing pressures on household finances, as earnings fail to keep pace with consumer price inflation, are expected to remain a constraint on the rate of growth of house prices. We are also seeing signs of a revival in housebuilding, which should bring supply and demand into better balance and curb upward pressure on prices over the medium and longer terms."