Britain's housing prices stagnate
Several measures of the housing market point to slowing in pace of price growth as the central bank acts to avoid run-up in mortgage debt
British house prices barely rose last month, according to a survey from mortgage lender Halifax that added to other signs of moderation in the housing market.
House prices edged up 0.1 per cent in August, slowing sharply from 1.2 per cent in July, Halifax said on Monday. Prices rose 9.7 per cent on an annual basis in the three months to August, slower than July's 10.2 per cent gain.
Economists polled by Reuters had expected annual growth of 9.9 per cent.
"There are some signs of an improvement in housing supply, both in terms of more second-hand properties coming on to the market and increased numbers of new homes," said Martin Ellis, housing economist at Halifax.
The number of new homes completed in England between April and June rose by 7 per cent compared with the same period last year, Halifax said, citing industry data.
But it also noted signs of shortages of supplies and skilled labour which could hold back the pace of house-building.
The Bank of England has identified the housing market as the biggest domestic risk to Britain's economic recovery and has taken steps to avoid a big run-up in risky mortgage debt.
The bank said it expected it could control the housing market without having to raise interest rates.
Several measures of the housing market have suggested a slowing in the pace of price growth.
Knight Frank believes the central bank's base rate would rise to hit 1 per cent by the fourth quarter of 2015, and 2 per cent by the fourth quarter of 2016.
A more rapid rise would quickly translate into higher mortgage rates, putting pressure on borrowers, reducing their ability to finance property purchases at current pricing levels, the international property consultant told private investors in Hong Kong last month.
Higher mortgage rates could feed through to an increase in repossessions, the number of which remained unusually low during the recent housing downturn, leading to an increase in supply of available property.
Talking about investment risk in British properties, the property consultant said that another risk factor was currency.
After falling from a 2007 high of US$2.10 to a 2009 low of US$1.36, the pound/US dollar rate has remained relatively constant between US$1.50 and US$1.70.
Knight Frank expects that the rate will remain below a high of US$1.75 up to the end of the fourth quarter of 2015.
A strengthening in the pound much above US$1.80 would begin to weaken the attraction of British property for investors, and could begin to encourage profit taking from those overseas purchasers who locked in especially favourable rates in either 2009 or 2010, it said.
Additional reporting by Peggy Sito