British house prices are now 8% higher than a year ago, according to two widely watched surveys, the biggest increase in over three years. Joanna Partridge asks if the UK is seeing a bubble or just playing catch-up?
REPORTER: An Englishman's home is his castle, they say - make that an increasingly expensive castle. British house prices are now around 8% higher than a year ago, according to two of the most widely-watched measures. That's the biggest increase in over three years - and there's no end in sight. The Royal Institution of Chartered Surveyors expects prices to continue their climb over the next three months. Britain's housing market has been boosted by falling unemployment, low interest rates and government programmes to make mortgages cheaper and easier to get hold of. Wealthy foreign buyers - seeing investment potential - are fuelling the trend. And there are fears of a bubble. Nick Parsons from National Australia Bank doesn't think Britain's there yet - as the most acute price rises are in London.
NICK PARSONS, HEAD OF MARKETS STRATEGY, NATIONAL AUSTRALIA BANK: "We think in any case policymakers have got a much wider toolkit to deal with these problems than they had previously. We've seen the term macroprudential regulations being introduced in New Zealand, that's now become I think a familiar concept, and there are many ways to deal with a housing bubble should it materialise or should it threaten to materialise before we ever get to the state of having to raise interest rates."
REPORTER: The Bank of England certainly expects prices to keep rising, and will be keeping a close eye on them. Governor Mark Carney believes at the moment housing activity is only catching up after the lows during the financial crisis. But he also warned Britain isn't building enough houses, a view shared by Michael Ingram from BGC Partners.
MICHAEL INGRAM, MARKET COMMENTATOR, BGC PARTNERS: "We're building probably about a third of the number of houses that we need to in the UK overall, and in London the position is even worse. However, one has to say that what can't go on for ever at some point has to end. The only question is when? Mark Carney thinks it's going to be some time at the back end of 2015, or maybe into 2016, but we shall have to see."
REPORTER: But there's no sign of a real increase in housebuilding yet. And with the old tradition of supply and demand, as long as the English castle remains popular, and funding to buy them is in place, prices are unlikely to slow down.
An Englishman's home is his castle is a well-known saying used to show that English people believe that they should be able to control what happens in their own homes, and that no one else should tell them what to do there. See The Phrase Finder for the origin of this expression.