Image credit: Flickr/Raphael Chekroun

Finally, the number of houses being built has risen

Figures show housebuilding rose at its fastest rate in more than a decade last month. Although it's coming from a low base...

by Emma Haslett
Last Updated: 26 Aug 2014

If you've been following house prices over the past year or so, you'll know much of the blame for ever-inflating prices is more often than not laid at the feet of housebuilders, who are accused of not building enough homes. But new figures have shown the number of houses being built increased to its highest level in 10 years in July. Is this the beginning of the end for the house price bubble?

The figures, by Markit, showed construction activity rose for the 15th month in a row in July, led by a rise in residential construction (although all three of construction's sub-categories - residential, commercial and civil engineering - recorded increases). Its purchasing managers' index stood at 62.4 in July, down on June's 62.6, but well above 50 (anything below 50 suggests a contraction), and above analysts' expectations of 62. This is particularly good news, given official figures showed the sector contracted in the second quarter of the year...

'UK construction is enjoying its strongest cyclical upswing since the global financial crisis, while a new record rise in employment highlights that construction firms are increasingly confident about the sustainability of the upturn,' said Tim Moore, Markit's senior economist.

It's good news for hard done by first time buyers, who continue to struggle to get a foot on the housing ladder. But let's not forget house prices are already softening: figures published last week by Nationwide showed annual growth in prices dropped to 10.6% in July, from 11.8% in June. Which, again, is great news for those at the bottom of the ladder. But for those anywhere from the middle upwards, the prospect of house price growth slowing too much is a little frightening.

At the moment, it's all going in the right direction. But the fact the likes of the International Monetary Fund suggests the UK housing market is 'vulnerable' is alarming. Whatever happens, the market will correct itself. The risk is whether it will over-correct itself, leaving those who bought their properties recently in negative equity.

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