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Dec. 12 (Bloomberg) -- U.K. house prices will remain little changed next year as the balance between weak demand and a shortage of supply leaves the market without direction, according to Halifax.
Values will rise or fall by no more than 2 percent next year, the Lloyds Banking Group Plc mortgage-lending unit said in an e-mailed statement today. Prices have slipped 0.7 percent this year, according to Halifax’s monthly index.
Bank of England officials kept their benchmark interest rate at a record-low 0.5 percent this month, helping to keep mortgage costs low. While a long-term shortage of properties will also support values, a faltering economic recovery, rising unemployment and pressure on household finances will curb demand for real estate, Halifax said.
“There is currently considerable uncertainty regarding the prospects for the U.K. economy,” Halifax economist Martin Ellis said in the statement. “Prices are again likely to end the year at levels close to where they begin with the market continuing to lack any real direction.”
Britons’ confidence in the housing market has fallen, according to a Halifax report published on Nov. 1, showing a gauge of home-price expectations fell to minus 2 from 9 in April. The Centre for Economics and Business Research cut its forecast for 2012 home-price inflation last month to 1.6 percent from 2.4 percent. It also said that while a shortage of properties will help push up values, that will happen “only slowly.”
“The outlook for both the economy and house prices is particularly uncertain” and the Bank of England won’t raise its key interest rate until at least 2013, Halifax said today.
Further ahead, prices will be bolstered by fact that the number of properties being built fell during the financial crisis, exacerbating a “long-standing deficit” of new houses, it said.
That imbalance “should help to support house prices over the medium and longer terms,” Ellis said. “Nonetheless, with the ratio of house prices to earnings still above its long-term average, any price growth is likely to remain weak over the coming few years.”
--Editors: Fergal O’Brien, Jeffrey Donovan
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