U.K. House Price Recovery Will Continue Through 2014, CEBR Says in Report
The U.K. house-price recovery will continue through 2014 as low interest rates and a shortage of supply buoy the market, the Centre for Economics and Business Research said.
Prices in the fourth quarter will be 6.7 percent higher than a year earlier, rising to an average 179,000 pounds ($279,000), the London-based research group said in an e-mailed statement today. The annual rate of growth in the fourth quarter of 2011 will ease to 2 percent, it said.
The CEBR downplayed recent reports indicating the house- price recovery is fading. Mortgage approvals fell in June and data from Nationwide Building Society and Hometrack Ltd. showed prices declined in July. The market is “correcting for getting ahead of itself at the beginning of the year” and the drop isn’t a “prelude to an even steeper decline,” it said.
“The forecasted prolonged period of very low interest rates will continue to stimulate demand for housing over the coming years,” the CEBR said in the report. “Strict planning regulations and a deep recession have contributed to a tight supply of new housing on our small island and are likely to persist, thus helping to drive house prices upwards.”
Bank of England Governor Mervyn King said last week there may be a “considerable” way to go before the benchmark interest rate rises from the current 0.5 percent to a more “normal” level.
The central bank has held the rate at that level since March 2009 and former U.K. Treasury adviser Roger Bootle yesterday forecast that borrowing costs won’t be increased until at least 2012 as the government’s budget squeeze threatens a “fragile” recovery.
To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net
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