LONDON--U.K. house price expectations among home-owners edged back to a six-month low in June, a survey showed Friday, just one week after the U.K.'s top two financial chiefs warned of the potential threat surging house prices could pose to financial stability.
The monthly house price sentiment survey compiled by estate agency Knight Frank and data firm Markit showed the balance of home-owners who expect the value of their home will rise in the next 12 months slipped to 71.6 in June, down from May's record high 75.1 and marking the lowest level since December.
The balance is calculated by subtracting the proportion of home-owners who expect house prices to fall from those who say they will rise.
The survey also showed a lowerproportion of survey respondents--a balance of 62.5--said the value of their home was higher in June than in May, when the balance was 63.2.
"This month marks the first significant easing in house price expectations in nearly a year, and it is the biggest monthly decline since October 2011, suggesting a greater degree of caution by households," said Knight Frank's head of U.K. residential research Grianne Gilmore. "This may well be welcomed by policymakers amid discussions about the possible use of macro prudential instruments, or cooling measures, by the Bank of England."
The news that some home-owners are scaling back their expectations of house price growth follows the latest surveys from online estate agency Rightmove and the Royal Institution of Chartered Surveyors which said demand for property eased in May.
Signs that the U.K.'s booming housing market could be beginning to cool will likely be welcomed by Bank of England GovernorMark Carney and Chancellor of the Exchequer George Osborne.
At last week's annual black-tie Mansion House banquet for bankers and business leaders, both financial policy chiefs warned risky bank lending practices could fuel house price rises further and pose a threat to financial stability and the economic recovery.
Mr. Osborne announced that he was giving the BOE new authority to restrict lending by limiting how much home buyers can borrow relative to their incomes and as a proportion of a property's value.
"I want to make sure that the Bank of England has all the weapons it needs to guard against risks in the housing market," Mr. Osborne said.
At the same event, BOE Gov. Carney told attendees that real estate is "the greatest risk" to the domestic economy.
In the mean-time, as well as close monitoring of the U.K.'s mortgage market, the government is continuing to offer support for construction firms by simplifying planning rules for building housing.
A key reason for the high level of home prices in the U.K. is the lack of properties built in recent years. Building new homes provides only a slow response to the high and growing need for them, particularly in the populous London and south east. But easier planning codes should help limit the possibility that the number of new homes being built in the U.K. falls as low as the 100,000 per year mark.
A trusted estimate of the number of homes required to be built per year in the U.K. to keep pace with the population is 240,000 calculated by former Bank of England member Kate Barker when she undertook a housing review for the Government in 2004.
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(END) Dow Jones Newswires
June 19, 2014 22:05 ET (02:05 GMT)
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