George Osborne's schemes to kickstart house sales have fuelled a surge in interest from homebuyers and the fastest rise in prices since their peak seven years ago, according to a wide-ranging survey of estate agents.
In the latest indication that a recovery in the property market is under way, the Royal Institution of Chartered Surveyors (Rics) said that Help to Buy and other initiatives have prompted the sector to "turn a corner" after its post-recession slump. Its monthly report says prices are up for a fourth consecutive month as buyers return to the market in their biggest numbers for four years.
The report echoes those from other players in the property market, which have shown prices gathering momentum in the first half of 2013. As such, it will raise fears that the government's plans may fuel a house-price bubble. There has been evidence in recent weeks that soaring prices in London are pricing families out of the capital, leading critics to say the market is already out of control.
Rics says July saw an acceleration in the housing market recovery that has been running for some time now.
"Since the start of the year, buyers have gradually been returning to test the market – thanks in no small part to government finance initiatives – yet the amount of would-be buyers seen in July saw a sizeable peak," the group said.
"Significantly, this growth was seen in each and every part of the UK as the recovery, initially focused in the south-east, spread to regions across the country."
The West Midlands and the north-east – areas which have suffered more than most since the market crash – experienced the biggest increases in buyer activity in July, it added.
That widespread pickup saw prices rise at their fastest rate since the market peak of November 2006. The report's headline prices balance stood at 36, based on the proportion of respondents reporting a rise in prices minus those reporting a fall. It was 21 in July.
Alongside returning buyer confidence there was a pickup in potential sellers too, with new instructions growing for the sixth month in a row. Still, the rise in supply has not kept pace with the rise in demand, particularly in London, pointing to more price rises ahead. Rics said estate agents had significantly upgraded their forecasts for house price growth in recent months and now expect growth of 2% over the coming year and of more than 4% in each of the next five years.
Rics' global residential director, Peter Bolton King, commented: "It looks like at long last a recovery could be around the corner. Growth in buyer numbers and prices have been happening in some parts of the country since the beginning of the year but this is the first time that everywhere has experienced some improvement."
Estate agents interviewed by Rics said Funding for Lending, a scheme launched by the Treasury and Bank of England, and the Help to Buy programme were boosting activity. "The former, in particular, has played a role in helping to improve mortgage availability," it said.
Experts have raised concerns that the government's Help to Buy scheme, which was introduced in April and provides equity loans for first-time buyers of up to 20% towards the cost of new-build properties worth up to £600,000, could spark a new bubble. The International Monetary Fund and others have criticised the scheme, which will be expanded in January to make the loans available to all buyers and all types of property up to the £600,000 limit.
The report echoes news from the Council of Mortgage Lenders that lending to first-time buyers has hit its largest quarterly total since before the downturn. CML said that 25,300 loans were advanced to first-time buyers in June, a 30% increase on June last year. Building on strength in first-time buyer activity in previous months that took quarterly lending to first-time buyers to its highest since 2007.
First-time buyers continued to increase the amount they borrowed – with an average loan size rising to £117,000 in June from £112,500 in May – probably on the back of rising prices, CML added.
Legal & General Mortgage Club, which acts for thousands of estate agents, said it had just notched up its largest month of mortgage completions since launching in 1995. Its managing director, Ben Thompson, said the CML data suggested "the market is starting to re-build from the bottom up".
But he added: "Despite the good news, there is still more to be done. The shortage of new houses being built needs to be tackled, which will also help to control house price growth. Furthermore, stamp duty remains a barrier to both entering and moving up the property ladder."
• The average price of a flat in England and Wales has breached £250,000 for the first time, according to government data. The price of all property in England and Wales grew 1.3% in the second quarter of this year to reach an average of £242,415, nearing the threshold of £250,000 where stamp duty jumps from 1% to 3%. Flats, which represent 18% of the total market, have already passed that barrier, with the average price at £250,101, according to Land Registry quarterly numbers shared by investment advisors London Central Portfolio (LCP). Transactions in England and Wales jumped 26.6% from the first quarter, partly driven by renewed economic confidence and government homebuyer schemes but also by the typical seasonal pickup in the market, LCP said. It added: "The market continues to storm ahead in prime central London. Average prices grew 7.2% this quarter to reach £1,472,181."
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