House prices to see fastest rise in four years - Reuters poll

LONDON Tue May 28, 2013 4:06pm BST

People view properties advertised for sale in the window of an estate agent in west London January 2, 2009. REUTERS/Stephen Hird

People view properties advertised for sale in the window of an estate agent in west London January 2, 2009.

Credit: Reuters/Stephen Hird

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LONDON (Reuters) - British house prices will rise at their fastest pace in four years in 2013 with London prices storming ahead, a Reuters poll found on Monday, also showing that the gains would not match inflation this year.

Low interest rates and government lending incentives to stimulate growth in the housing market mean prices remain overvalued, analysts said.

The poll of 23 market watchers, taken in the past week, predicted UK house prices would rise 2.0 percent this year, far more upbeat than the flat outlook envisaged in a February poll. Forecasts ranged from a 2.0 percent fall to a 5 percent rise.

In 2014 they will gather momentum to 2.4 percent - still only in line with consumer price inflation which is expected to average 2.4 percent next year.

"Stronger than expected first quarter GDP data will provide an important bolster to household confidence. At the same time, borrowing costs are coming down and banks are expected to approve more mortgage applications," said Melanie Bowler at Moody's Analytics.

Britain's economy basically flatlined for most of the last two years but is expected to grow 0.8 percent this year and 1.5 percent in 2014.

The price of London homes, long the magnet for rich overseas investors, are expected to soar 5.0 percent this year and next as demand in the capital continues to outrun supply.

During a decade-long boom to 2007, house prices tripled but sank at the start of the financial crisis Most respondents do not see them reaching pre-crash prices for several years.

BUILDING SUPPORT

The average house price in Britain stood at 165,586 pounds in April, according to mortgage lender Nationwide, over six times last year's average salary of 26,500 pounds.

Most respondents said that average price was still too high, with the poll giving a consensus rating of six on a 10-point scale, where one is very undervalued and 10 is very overvalued.

The Bank of England slashed interest rates to a record low 0.5 percent over four years ago, making borrowing cheap for those who managed to get a mortgage, and is not expected to raise them until 2015 at the earliest.

The Bank extended its Funding for Lending scheme (FLS) last month for another year, offering banks cheap finance if they in turn lend on to households and businesses.

Mortgage approvals, used as a guide to future housing market activity, rose to 53,504 in March and are expected to average 57,000 per month in six month's time and 64,000 in a year.

Britain's government launched incentives to help struggling home buyers in March as it looks to support growth in a real estate market it sees as key to reviving the country's ailing economy.

(Polling by Rahul Karunakar and Shaloo Shrivastava; editing by Ron Askew)

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