RTTNews - U.K. house prices are expected to be in a better shape by the end of this year than they were in the beginning, the Royal Institution of Chartered Surveyors forecast Thursday. But, the agency said the new prediction of positive house price growth does not indicate a quick return to the boom time as activity remains very weak by historical standards.

RICS, which in December predicted a 10%-15% house price decline for 2009, now says the average price of a home will be slightly higher in the fourth quarter of 2009 than they were in the final three months of 2008. The institute added that the recent pickup in buyers inquiry and an increase in mortgage approvals would be the factors behind the rise in prices.

There has been a clear change in the housing market over the past few months, and, as a result, it is unlikely that we will now see the kind of house price falls widely predicted at the start of the year, said Brigid O'Leary, senior economist at RICS.

Instead, the return of buyer demand and the limited availability of housing on the market could be enough to support prices, so it wouldn't be surprising to actually see prices increase further from here in the short term.

Late in July, the Nationwide building society said a cumulative increase of 1.3% in its house price index in the first seven months of 2009 suggests that there is now a reasonable chance that prices could end the year slightly higher than where they started. Only a few months ago, such an outcome would have appeared unthinkable, the building society said.

Wednesday, Halifax also said there are signs for an improvement in the housing market activity.

In order to kick-start activities in the housing sector, U.K.'s Housing Ministry in July announced a GBP 925 million scheme to fund 270 stalled projects across the country.

However, RICS warned that prices may fall next year as tight credit conditions and rising number of unemployed reduce activities in the housing market.

However, the outlook for 2010 is fairly uncertain, and there is a real risk that prices may slip back again, O'Leary said. Affordability is still stretched and mortgage finance, while improving, is fairly hard to come by.

The Nationwide also pointed out that it is unlikely that price increases can be sustained for long at the very strong rate observed over the last few months given the expected rise in unemployment.

Given there are signs of an economic recovery, the Bank of England is likely to hold its key interest rate at a record low level of 0.5%. The BoE is due to announce its monetary policy decision at 7.00 a.m. ET on Thursday.

In addition to the decision on interest rate, the BoE is likely to assess the effectiveness of unconventional measures implemented to shore up the economy.

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