UK housing
House building has picked up in the UK, but the supply growth in the housing market still falls well short of spiraling demand Reuters

Demand in the UK housing market surged further ahead of sluggish supply during March, fuelling bubble concerns.

Hometrack, a housing research firm, said in its monthly report that demand lifted by 6.6% across March, but supply only grew 1.9%.

This is driving up house prices in all regions of the UK. Demand is being pumped by government schemes to make mortgages cheaper, such as Help to Buy, as well as the economic recovery.

According to the Office for National Statistics (ONS), UK house prices grew by 6.8% on average in the year to January 2014. This was up from 5.5% in December.

"Looking ahead the imbalance between supply and demand is set to remain a feature of the market and prices are set to continue to rise," said Richard Donnell, director of research at Hometrack.

"The scale of price rises over the next 12-18 months will be dictated by the ability and willingness of owner occupier households and investors to further bid up the price of housing."

Critics of stimulus for residential mortgages accuse the government of risking a housing bubble.

This is because the mortgage schemes come amid an abnormally low base rate at the Bank of England, falling incomes in real terms and a dearth in supply of new homes.

However Bank of England officials have played down bubble fears. Spencer Dale, the central bank's chief economist, said the housing market is beginning to look normal again.

"Any of us who have lived through any sort of economic history will know you can go from a healthy housing market to an overheating housing market very quickly, and so our job is to worry about those types of things and be alert to it," Dale said.

"We're fully alert to that risk and we're worrying about it. But I don't think those risks are materialising at the moment."

The Institute for Fiscal Studies (IFS), an influential thinktank, concluded in a comprehensive report on the UK economy that there is no evidence of a housing bubble.