concerns loom large over British housing market

Concerns loomed large as the British house prices increased 10.9 percent on a year on year basis in April, the annual growth reaching double digits for first time in almost four years. The overall average house price had climbed to 183,577 pounds in April, 1.2 percent higher than the previous month after being seasonally adgusted, according to a report released on Thursday by Nationwide, the largest building society in Britain. "After several months of moderation, the pace of house price growth picked up in April," said Robert Gardner, Chief Economist of the Nationwide, the largest building society in Britain. Price growth had been significantly stronger in the South of England, especially in London and the South East. In the first quarter of 2014, prices in the capital were around 20 percent higher than their pre-crisis levels, while in the UK as a whole prices were still around 2 percent lower, Nationwide disclosed. The price growth in London and the South East appears to be being driven by the top end of the market. The housing transactions data showed that higher priced properties in London and the South East have accounted for a higher proportion of transactions. For example, in London the proportion of housing transactions involving properties over half million pounds had increased from 13 percent in 2007 to around one quarter in 2013. The share involving properties of over one million pounds had more than doubled from 3 percent to more than 6 percent. "Underlying demand is likely to remain robust, as mortgage rates remain close to all-time lows and as consumer confidence improves further on the back of stronger labour market conditions and the brighter economic outlook," said Gardner. By contrast, the upturn in construction of new homes continues to lag far behind the upturn in demand, with the number of new homes being built in England still around 40 percent below pre-crisis levels. "The risk is that unless supply accelerates significantly, affordability will become stretched," Gardner added. Meanwhile, the number of loan approvals from British banks for house purchases fell from 69,592 in February to 67,135 in March, marking the second month of decrease, according to the British central bank. Matthew Pointon, Property Economist of Capital Economics, said that "alongside the fall in house prices in March reported by the Land Registry yesterday, the housing market is therefore sending out rather mixed messages. But the overall picture is one of a market that continues to recover, but which is not as yet showing signs of running out of control." But he also pointed out that demand for homes will continue to be supported by a growing economy, rising real earnings and expectations, that "prices are set to rise further." Another report also prompted more concerns hanging over the British housing market. The report publised by accountancy firm KPMG and the housing charity Shelter said that average house prices in England could double over the next 10 years to nearly half million pounds. The report also said that by 2040 more than half of 20 to 34 year-olds would still be living with their parents, if current trends continue. Spencer Dale, chief economist of British central bank, said on Wednesday that Britain's housing market posed the biggest threat to its financial stability. History showed that the UK housing market could switch from being"comfortably warm to dangerously hot in a relatively short period of time," said Dale, who will take over as the central bank's financial stability chief in June. He said a meeting of the Financial Policy Committee in June would consider possible responses to the house prices during the testimony. He warned that policy makers could not afford to sit back and let the housing market gains spin out of control, adding that if they waited until they were sure that a bubble had emerged it would be too late.