British house prices ‘overheat’

British house prices may have risen too much since 1995 to remain at current levels, according to Olaf Weeken, an economic analyst at the Bank of England.

The average house price was about 25 times income from rental property in 2003. That’s up from less than 15 times in 1995 and above the average of about 18 since 1967, Weeken wrote in the bank’s Quarterly Bulletin.

House prices fell following peaks in that ratio at the end of the 1970s and the 1980s. Weeken’s comments suggest policy makers at the central bank are concerned housing prices may tumble in the years ahead, hurting the wealth of consumers whose spending fuels two-thirds of the British economy.