British house prices will rise by just over 1% in 2005 after years of double-digit growth but the risk of a crash has eased, according to a Reuters poll of 24 economists.
The survey, carried out in August 15-17, showed only an 11% chance of a housing market crash in the next year - down slightly from a forecast of 14% in last quarter's poll in May - with forecasts ranging from 5-25%. The majority of economists defined a crash as a sharp drop in prices of between 10-20% within a year.
The housing market is a key influence on consumer spending in Britain where two thirds of households own their home. The poll's results are in line with recent surveys by major mortgage lenders Nationwide and Halifax and government figures issued by the Land Registry which have all shown house price inflation at multi-year lows.
The Bank of England's rate cut to 4.5% from 4.75% earlier this month should help revive activity in the housing market although a fresh double-digit boom in prices seen last year is unlikely, economists said.
Mortgage lending by British banks slowed considerably in July to its weakest level in three and a half years, as potential buyers may have postponed getting mortgages in anticipation of the cut.
Nineteen economists said British house prices were overvalued while two said they were not, but affordability should improve if prices stabilise and earnings continue to rise. The median of 11 forecasts showed the average British house price, based on the main house prices indices, at £162,000 sterling by the end of 2005.
House price measures vary widely. The Halifax reported an average price of £162,994, compared with £158,348 recorded by the Nationwide in July. The Office of the Deputy Prime Minister (ODPM) said its average house price stood at £184,152 in June.
Deteriorating labour market conditions, a sharp slowdown in the global economy and fresh terror attacks in Britain were cited as main risks to the UK housing market.
