House price recovery to taper off

MORTGAGE MALAISE

LONDON (Reuters) - British house prices will regain some lost value this year but while the speed of the uptick will taper off next year there is little chance of a double dip, according to the latest Reuters poll of property analysts

The quarterly survey of 27 analysts showed house prices will increase 3.5 percent this year but just 1.9 percent in 2011, a rosier outlook for 2010 than in April's poll which saw prices rising 2.0 percent this year and 1.9 percent in 2011

Only six of 22 analysts in the poll taken between July 1-8 said prices would fall again

"We are not currently predicting a double dip but we are concerned by the fact that housing remains expensive," said Peter Dixon at Commerzbank

The Halifax said on Thursday house prices were up 6.3 percent in the three months to June compared with a year ago, taking the average price of a home to 166,203 pounds -- nearly seven times the annual UK salary

The forecasts are a far cry from the double-digit rises seen in the boom years but will provide some relief to homeowners who saw thousands wiped from the value of their properties in the last couple of years

Average home prices tripled in the 10 years to a peak struck in 2007 but crashed as the financial crisis set in and mortgage lending evaporated

As the economy faltered in late 2008, the Bank of England chopped a whopping 450 basis points from benchmark interest rates, putting them at a record low of just 0.5 percent, thereby dramatically reducing mortgage payments for many homeowners

But with interest rates at rock bottom the only way is up, although economists polled by Reuters say it will be next April at least before the BoE begins to raise them again

"The challenge for house prices will come if the Bank of England raises interest rates too quickly, but any significant rise in the bank rate still appears to be a few years away," said Ray Boulger at John Charcol

MORTGAGE MALAISE

The survey showed analysts believe British house prices are still overvalued. They gave prices a median rating of six on a scale where 10 was extremely overvalued and one extremely undervalued. That compares to seven in the April poll

The house price to earnings ratio -- a measure of affordability -- held steady at 4.72 in June, according to figures from the Halifax survey. But that ratio is still above the 4.0 ratio that economists said was sustainable over the long term

Respondents saw monthly mortgage approvals -- loans agreed but not yet made and a good forward indicator of housing activity -- at 55,000 in six months, lower than the 60,000 seen in the corresponding forecast from April's poll

The 12-month expectation of 60,000 was down from the previous survey's 70,000 but above the 49,815 level at which mortgage approvals stagnated in May, less than half the average of 104,000 seen in 2007

Property Website Rightmove's commercial director Miles Shipside said last month that a continued dearth of mortgage availability and a recent surge in sellers were weighing on the market and would likely put an end to this year's recovery in prices

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Real estate developer St Modwen Properties Plc (SMP.L) said on Monday the significant improvement in property prices had helped it swing to a first-half pretax profit. On Tuesday house builder Persimmon (PSN.L) reported higher sales in the first half but said shaky consumer confidence was weighing on the outlook

(Polling by Bangalore Polling Unit)