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UK house prices rise for 8th month in a row: report

August average up 0.4% at £199,700, says lender HBOS

(LONDON) UK house prices rose for an eighth month in August, a sign that five interest rate increases have yet to curb demand for property, a report from HBOS plc showed.

The average cost of a home climbed 0.4 per cent last month to £199,770 (S$613,000), compared with 0.8 per cent in July, the UK’s biggest mortgage lender said in a statement on the Regulatory News Service. Prices rose 11.4 per cent in August from a year earlier, up from an 11.2 per cent annual gain the previous month.

The report adds to evidence of resilience in the property market as a shortage of housing offsets the impact of higher borrowing costs. The Bank of England may keep the key interest rate at a six-year high tomorrow as policy makers gauge the effects of previous increases and financial market turbulence on the economy.

‘A sound economic background, together with an on-going shortage of both new house building and secondhand properties for sale, should continue to support house prices,’ HBOS said.

The central bank, which announces its decision at noon in London today, will keep the key rate at 5.75 per cent, according to all 60 economists in a Bloomberg survey.

Prime Minister Gordon Brown is trying to spur home building after house prices tripled in a decade. Building stagnated at 148,000 new units a year on average between 1989 and 2005, down from a peak of 425,000 in 1968, government figures show.

Demand for property has yet to show signs of cooling. UK banks approved 115,000 mortgages for house purchase in August, more than economists forecast and the same as the previous month.

House price reports have been mixed. The cost of a home rose 0.6 per cent in August, up from a 0.1 per cent in July, Nationwide Building Society said last week.

Hometrack, a property research company based in London, said that prices stagnated for the first time in 20 months in August.

 

Source: Bloomberg (Business Time 6 Sept 07)

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