UK house-price spurt 'should not continue'
Published 09/09/2011 | 05:00
UK homeowners shouldn't count on making money from their property as the pace of price gains slows, according to British Housing Minister Grant Shapps.
"Gone are the days where you buy a house for capital appreciation," Mr Shapps said. "House prices can still go up, but they need to go up in line with or less than increases in average earnings for the long term."
On average, house prices rose 147pc from 2000 to the market's peak in October 2007, according to lender Nationwide Building Society, based in Swindon, England. That was 11 times faster than inflation of 13.2pc.
Prices are rising again as a shortage of homes, which may reach one million by 2015, is helping to support prices, according to London-based property broker Savills. Record-low Bank of England interest rates have also bolstered demand, and prices.
The government is trying to address the shortage by freeing up public land, offering municipalities incentives to approve more housing plans and encouraging banks to increase lending to prospective buyers.
In a separate development, Danske Bank warned that the UK should lose its top AAA credit rating and be cut by four notches to A+, the same as Standard & Poor's rate for Italy and Slovakia, as the economy slows and government debt levels rise more than expected.
"A downgrade of the UK could in our view happen in 2012 and we believe it can remain a market theme into 2013," Danske Bank analysts John Hydeskov and Hugo Railing said in a report.
S&P, Moody's Investors Service and Fitch Ratings have all assigned the UK the top grade with stable outlooks, indicating a change soon is not likely.