U.K. House Prices Will Increase in 2009, RICS Says

By Brian Swint

Aug. 6 (Bloomberg) -- U.K. house prices will rise in 2009, the Royal Institution of Chartered Surveyors said, reversing an earlier prediction for a drop of as much as 15 percent.

The average price of a home will be “slightly higher” in the fourth quarter of 2009 than it was in the same period last year, RICS said in a statement in London today. Lower interest rates and the decline in house prices from their peak in 2007 have lured buyers back to the market, the group said.

Signs are mounting that Britain’s economy is recovering, with reports yesterday showing house prices jumped almost twice as much as economists forecast in July and consumer confidence rising to the highest in more than a year. The Bank of England will today decide whether to buy more assets with newly created money to combat the recession.

“There has been a clear change in the housing market over the past few months,” said Brigid O’Leary, a senior economist at RICS. “However, the outlook for 2010 is fairly uncertain, and there is a real risk that prices may slip back again.”

The pound traded near a nine-month high today at $1.6979 as of 10 a.m. in London.

RICS predicted in December that U.K. house prices would drop between 10 percent and 15 percent this year. After tripling in a decade, property values are now about 20 percent lower than their peak in 2007, according to data from Lloyds Banking Group Plc’s Halifax division.

Services, Manufacturing

U.K. services expanded the most in 1 1/2 years in July and manufacturing unexpectedly rose in June, reports showed yesterday. Home values climbed 1.1 percent to an average of 159,623 pounds ($269,850) last month, Halifax said.

Nationwide Building Society’s index of consumer sentiment rose to 60, the highest since May 2008. Homeowners expect the value of their properties to rise 0.5 percent in the next six months, the most since December 2007, Nationwide said.

Rising unemployment and increases in mortgage rates will limit the recovery in house prices, RICS said.

“This does not indicate a quick return to boom time, as activity remains very weak by historical standards,” RICS said in the report. “A return to a more orderly market is still some way off.”

Signals that the recession is past its worst may nevertheless sway the Bank of England to pause its money- printing program, which was started in March to pump more cash into the slumping economy. So far it has bought 125 billion pounds in securities. The decision is due at noon in London.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.