House prices rise six times faster than earnings

HOUSE prices rose by 7.5 per cent in 2013 as the property market increased six times faster than the rate of typical incomes last year.

Halifax, which released the annual figures yesterday, said prices rose 1.9 per cent in the last three months of the year alone.

Earnings only rose by 1.1 per cent between October 2012 and the same month last year, according to official statistics, fuelling concerns about the affordability of housing.

“Continuing pressures on household finances, as earnings again fail to keep pace with consumer price inflation, are expected to constrain demand,” commented Halifax housing economist Martin Ellis.

He added: “Mounting signs that the economic recovery is becoming firmly established, together with a predicted decline in unemployment, should further boost consumer confidence over the coming months.”

The rapid increase in house prices during 2013 is likely to continue into this year, according to IHS Global Insight. The forecasters are projecting a further eight per cent rise in prices, despite muted salary increases.

The group’s chief UK economist, Howard Archer, warned that this could be bad news: “There is still a very real risk that a new housing bubble could really develop in 2014.”