Fears grow of British housing bubble

 Home ownership is pursued almost as a right in Britain but thehousing market has a history of boom and bust -- and fears are growing of a newbubble.The Bank of England, three former finance ministers and the Organisation forEconomic Cooperation and Development (OECD) have all raised concerns that risingprices could threaten Britain's economic recovery.House prices across the country rose at 10.9 percent in the year to April, the fastestrate for four years. In London, the increase was 18 percent, according to Nationwide,Britain's leading mortgage provider.The cost of a house in the capital is now 20 percent higher than it was at theirprevious peak before the financial crisis in 2008 sent values tumbling, although therest of the country has yet to regain pre-recession levels.Buying their own place is a dream of many Britons, encouraged by successivegovernments, notably that of former prime minister Margaret Thatcher, whichallowed tenants of social housing to buy their homes. But the dream is becoming harder and harder to realise.In the early 1980s, the average first-time buyer was 27 or 28 years old and paid anaverage of £17,000 (the equivalent of £49,000 or 60,000 euros/$83,000 in today's prices) for their home. Today, they are 30 and pay an average of just under £147,000,according to a study by HSBC. In London, the average property now costs £480,000 (590,000 euros) according toonline portal Rightmove, 14 times the median salary and a sum beyond the reach ofkey workers such as nurses and many teachers.Some of the growth has been fuelled by foreign investors looking for a safe havenfor their money.In a new record for property in London, a buyer from Eastern Europe reportedlybought a penthouse in an exclusive development overlooking Hyde Park recently fora staggering £140 million.Finance Minister George Osborne sought to calm the rampant overseas interest thatrisks transforming parts of the city into ghost streets, by announcing in March anew tax on high-end properties owned by non-residents.- 'We should be nervous' -"We know we should be nervous about what's going on in the housing market," theBank of England's outgoing chief economist Spencer Dale told parliament earlierthis month.Jon Cunliffe, deputy governor for financial stability, has also said that spiralling property prices are the "brightest (hazard) light" on the Bank's dashboard.The OECD added to pressure to cool the housing market in a report last week,warning that prices were soaring when compared to rents and household incomes.It urged measures to "address the risks of excessive house price inflation", inparticular by introducing more restrictions on the government's "Help to Buy"scheme.The programme was introduced last year in England to help buyers struggling tosave a deposit, and has since then been taken up by 19,000 people.Participants need only provide a five percent deposit on a home up to £600,000, withthe government providing a loan worth 20 percent and a mortgage making up therest.Numerous experts, including three former finance ministers, have warned of a chronic shortage of housing and warned that "Help to Buy" is pushing prices higher.But Osborne has defended the scheme and insisted the Bank of England hadsufficient powers to act if it felt the housing market needed cooling. "I've said we should be vigilant about the housing market and this government hasgiven the Bank of England the powers, the tools to do that in an independent way,"he told the BBC last week.As Britain's economic recovery picks up speed, the OECD expects the Bank ofEngland to raise interest rates from 0.50 percent -- the record low maintained sinceMarch 2009 -- to 1.0 percent next year.This would raise the cost of mortgages with variable rates, about half of allmortgages in Britain, along with the accompanying risk of a rise in repossessions.