A temporary surge in house price growth

The CoreLogic measure of house prices surged by a seasonally-adjusted 1.4% m/m in January, the largest monthly gain in almost two years. This acceleration appears to have been caused by the tightness of supply conditions in recent months. Moreover, with real incomes rising rapidly and consumer confidence soaring, the conditions are certainly in place for a temporary period of faster house price inflation. Looking ahead, however, a sustained rise in homebuilding should see supply conditions loosen. And with housing now approaching fair value, we doubt that prices will rise by much more than incomes over the next couple of years.