(Updates with BoE rate decision, quotes)
By Ana Nicolaci da Costa
LONDON, April 10 House prices and sales took off
again in Britain last month, reflecting the economy's
surprisingly fast recovery, but the Bank of England stuck to its
course and left interest rates unchanged at record lows.
A closely watched survey from the Royal Institution of
Chartered Surveyors showed British house prices ratcheting up in
March and sales reaching a six-year high.
The group called for more houses to be built to meet
over-stretched demand. Contributors to its survey nearly doubled
their projection for annual house price inflation over the next
The BoE has said it is "vigilant" to the risks of an
over-heating property market but that it plans to deal with it,
if prices threaten to get out of control, first by trying to
curb mortgage lending directly rather than by raising interest
The bank is concerned that raising rates too soon could
unseat the recovery. It has indicated it is in no hurry to
tighten monetary policy, with inflation now trending below
It kept rates at 0.5 percent on Thursday, where they have
been since 2009, and said it would maintain the stock of asset
purchases from its quantitative easing programme at 375 billion
pounds ($628.07 billion).
Analysts say the decisive factor for the BoE is likely to be
wages, which are only slowly showing signs of rising.
"Wages are the thing that will trigger a rate move. I think
they have different tools they may well deploy to address house
price inflation," said Alan Clarke, economist at Scotiabank.
Record low interest rates, low unemployment and
government-sponsored schemes have all buoyed Britain's housing
House prices have also risen due to a shortage of supply and
because of foreign interest in London properties, pricing some
people off the housing ladder despite government efforts to the
contrary ahead of elections next year.
The surveyors' group said its seasonally adjusted house
price balance rose last month to +57 from an upwardly revised
+47 in February, beating all forecasts in a Reuters poll. The
rise took the balance near to November's +58, which was the
highest since June 2002.
House prices rose in every area of Britain in March, and by
the most in London and the South East.
As demand outstrips supply, contributors to the survey
expected prices nationally to rise by 5.9 percent a year over
the next five years, nearly double the 3.1 percent forecast this
time last year.
"For the market to operate effectively, we desperately need
more homes in areas where people want to buy and want to live,"
Simon Rubinsohn, the surveyors' chief economist said.
"Until this happens, we're likely to see prices continue to
increase and it is going to be ever harder for many first time
buyers to conceive of ever owning their own home."
HELP TO BUY
The government has sought to tackle the supply problem by
providing equity loans to buyers of newly built homes through
its Help to Buy scheme and last month announced it would extend
this part of the scheme to the end of the decade.
But some fear other government-supported programmes, such as
its guarantees for risky mortgages, could inflate prices
Indeed, concerns about the housing market prompted the BoE
at the start of the year to refocus its Funding for Lending
Scheme away from mortgage lending and dedicate it exclusively to
Finance minister George Osborne has played down the
immediate impact of rising house prices, but he too has said
vigilance is needed.
($1 = 0.5971 British Pounds)
(Reporting by Ana Nicolaci da Costa)