Is there a house price bubble on the horizon?

As David Cameron marked the formal start of construction at Battersea Power Station on Thursday, he could be forgiven for feeling some satisfaction.

Unique in its size and iconic status, the celebration of the site’s redevelopment into a residential and shopping hub offering 3,400-plus new homes capped a day of welcome news for a Prime Minister trying to kickstart Britain’s housing and housebuilding markets.

The housing market is, finally, showing “measurable improvement” for the first time since the downturn. That was the message from Taylor Wimpey, one of Britain’s biggest housebuilders. The update came as rival Galliford Try promised “record” profits for the year, while another, Redrow, said its results would be at the top end of City estimates after its revenues rose by more than a quarter.

Turning from the new-build sector to the wider market, mortgage lender Halifax reported that house prices had risen for a fifth consecutive month, to end up 3.7pc on the year. Even looking at the less volatile quarterly growth rate, the annual price climb was 2.1pc – passing the 2pc mark for the first time since January 2010.

What this all underlined was the improvement in the housing market since the financial crisis brought activity to a halt, sending property and land prices plummeting and putting the housebuilding sector in the deep freeze. Since then, the market has recovered somewhat from the impact of the credit crunch, with mortgage lending resuming – albeit at depressed levels – and the new-build industry repairing its margins.

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