There is a forest of cranes around London. Street after street is partially blocked by construction traffic and by skips to take away the rubbish from old buildings that are being knocked down or substantially altered. The work is now spreading outwards from the capital. The latest index of future activity, the PMI, hit 62.6 last month, its highest level since 1997. (Anything over 50 means growth in activity). New housebuilding is leading the charge, followed by private commercial developments to provide the new offices companies require as they expand.
The annual rate of increase in house prices hit 11.8% last month. For the first time average UK house prices are above the peak level in 2007 before the crash. This is in cash terms – they remain well down when adjusted for general inflation. In London house prices rose by a massive 26% over the last year. The average price of a home in London is well above any first time buyer’s reach on a normal income, unless they have other money to put in as a deposit. The government and Bank need to look at how to deal with this.
I welcome the general change in the UK economy as it resumes its growth path. Manufacturing is up as well as construction and general services. The rate of job creation is excellent, and many more people have now found work after the high unemployment of the 2009 recession.
I still think these buoyant figures suggest that the Bank of England should be taking more action to normalise interest rates after such a long period of rates close to zero.