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British house prices seen higher in 2000-Halifax

LONDON: The price of the average house in Britain will jump by 8.0 percent in 2000, the country's largest mortgage lender the Halifax forecast in a report on Friday.

The rate of expected house price inflation is nearly four times higher than Britain's current rate of core inflation of 2.2 percent, and will concern the central bank which is worried about housing wealth pushing up general inflation across the economy.

The Bank of England has raised interest rates twice in four months, to pre-empt future inflation pressures and avoid a re-run of the 1980s housing boom which ended in bust.

But Halifax said higher interest rates will constrain housing demand, as will the abolition of mortgage interest tax relief (a longstanding tax subsidy for home buyers) in April 2000. The gap between house prices in the north and south of England is also expected to widen.

PRICES UP, BUT NO RUNAWAY BOOM: "Whilst house price inflation is currently at its highest for a decade, the pick-up in prices this year does not mark the beginning of a runaway housing boom," said Gary Styles, head of group planning and economics at the Halifax.

"House price growth should ease during 2000...nevertheless, house prices are expected to continue to outstrip retail price inflation by a significant margin," he added.

British house price annual inflation is currently estimated to be running at 11 percent by the Halifax-the highest rate for a decade.

Rival mortgage lender the Nationwide Building Society said on Wednesday that British house prices rose 1.0 percent in December, compared with a revised gain of 1.6 percent the month before. On an annual basis, however, house prices inflation remained at 13.3 percent, the Nationwide, Britain's largest non-bank lender, said.

"The housing market remained strong in December, largely shrugging off the usual seasonal slowdown," said David Parry, the Nationwide's divisional director of planning.

He said part of the buoyancy was due to renewed interest from first time buyers, 63,000 of whom joined the market, pushing the number of sales to 141,000, the highest level since September 1997.

While residential house prices have shot up in recent years, particularly in the south-east powerhouse of Britain's economy, prices in relation to wages appear to be at a sustainable level.

A recent end-of-century review by the Halifax showed the average residential home is worth 135 times its value back in the 1930s-far outstripping retail price inflation which has risen 37 times and the London Stock Exchange FT 30 index which has risen some 40 times since its launch in 1935.-Reuters