New boom? UK tax break extension pumps up house prices

LONDON (Reuters) -British house prices surged last month, mortgage lender Halifax said on Friday, a further sign that finance minister Rishi Sunak’s decision to extend a property purchase tax cut has again pumped up the housing market.

Mortgage lender Halifax said house prices rose 1.1% in monthly terms during March, the biggest increase in six months, after a flat reading in February.

In annual terms, prices rose 6.5%, the strongest reading in four months and taking the average house price to a record high 254,606 pounds ($348,683), Halifax said.

The survey chimed with data from the Royal Institution of Chartered Surveyors on Thursday, which showed a renewed housing market upturn after Sunak’s budget last month.

Sunak extended his COVID-19 emergency cut to a property purchase tax, known as stamp duty, while Britain’s economy remained under the strain of social-distancing restrictions.

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

“The rise in house prices recorded by Halifax in March probably marks the start of a renewed surge in house price inflation into double figures over the summer,” said Andrew Wishart, an economist at consultancy Capital Economics.

MARKET BUBBLE FEARS

The housing market is an important source of consumer wealth and collateral for small business investment, but is also a marker of wealth inequality in Britain.

A new jump in house prices would boost all of those things.

“Have we learned nothing from the global financial crisis?,” former Bank of England policymaker Andrew Sentance said.

Then, loose monetary and financial policies including a massive housing price bubble resulted in crisis, he said on Twitter, adding: “History seems to be repeating itself now as the housing market is pumped up by low interest rates.”

Halifax said it expected the upturn to persist in the next few months as consumer confidence grows on the back of Britain’s swift COVID-19 vaccine rollout.

“However, with the economy yet to feel the full effect of its biggest recession in more than 300 years, we remain cautious about the longer-term outlook,” Halifax added.

($1 = 0.7302 pounds)

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