September 30, 2013 / 6:21 AM / 6 years ago

September house price rise biggest in six years

LONDON (Reuters) - House prices in England and Wales posted their biggest month-on-month gain in more than six years in September, but talk of a price bubble is overdone, property analysis firm Hometrack said in a survey on Monday.

A man paints a house near a property for sale in Burton Upon Trent August 13, 2013. REUTERS/Darren Staples

House prices rose 0.5 percent from August, the biggest increase since May 2007, Hometrack said. Prices were up 2.4 percent from the same month last year, the biggest annual increase since December 2007.

British house prices have picked up over the past 12 months, and some are concerned about an unsustainable price boom. But Richard Donnell, director of research at Hometrack, played down these fears.

“Prices are rising off a low base and talk of a housing bubble in relation to the national market is overdone,” he said.

“We are seeing continued house price growth in London combining with modest gains across other regions and creating a picture of a broadening market recovery,” he added.

Hometrack said it expected prices to continue to rise in the short term but cautioned that the market remained very sensitive to changes in demand and especially changing expectations over the outlook for mortgage rates.

Separate data from lender Nationwide released on Friday showed that British house prices shot up at their fastest annual pace in more than three years in September.

House prices have been aided by government schemes to lower banks’ borrowing costs and help home-buyers struggling to find large deposits. The latter scheme is set for expansion at the start of 2014. Chancellor George Osborne said on Thursday that he wanted the Bank of England to keep a closer eye on whether the scheme might stoke a bubble.

BoE Governor Mark Carney reiterated his view in an interview published on Friday that the market was seeing a turnaround but that levels of activity remained only around two-thirds of their longer-term averages for the sector.

Hometrack said an improving market was bringing more supply to the market outside southern England and keeping price rises in check. London and the southeast, however, had seen less growth in supply and hence greater price rises, it said.

The survey is based on responses from estate agents and surveyors across England and Wales.

Reporting by Hugh Lawson; editing by William Schomberg, Ron Askew

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