Booming house prices drive up the retail prices index

Soaring house prices have been driving up the retail prices index of inflation, according to a new analysis. RPI, which includes a housing depreciation component that reflects property prices, reached 3.9% in June and is on course to hit 5.6% later this year, Simon Ward, economic adviser at Janus Henderson Investors, said. As the Office for Budget Responsibility forecast RPI of just 2.4% in March, a 3.2 point overshoot would add £15.2bn to the cost of servicing the government’s £470bn portfolio of index-linked gilts, Ward said. The housing boom, which has driven annual house price inflation to a 17-year high of 13.2%, accounts for £2.4bn of the overshoot by directly increasing RPI, Ward calculated. Given that the bill for the stamp duty relief is officially estimated at £4.7bn, the combined cost to the exchequer of the property market boom is likely to top £7bn this year. 

The Times (31/08/2021)