By Christina Fincher
LONDON (Reuters) - British property surveyors called on the Bank of England to limit the rise in house price, joining a chorus of concern about the risk of a new boom-bust cycle in the country's housing market.
The proposal by the Royal Institution of Chartered Surveyors - an unusual one from an industry group that typically benefits from rising prices - is for the central bank to take measures to slow mortgage lending if house price growth exceeds 5 percent a year.
The upturn in Britain's property market is likely to be high on the agenda of the BoE's Financial Policy Committee when it meets next Wednesday. The committee is charged with spotting risks in the financial sector and acting to head them off.
Annual house price inflation has already jumped above 5 percent, according to mortgage lender Halifax.
The government says its "Help to Buy" initiative will help first-time buyers get on the property ladder and says activity in the housing market remains far below its pre-crisis peak.
But critics say the new measures will merely push prices further out of the reach of first-time buyers.
A second, more controversial phase of the plan, which will provide state guarantees for riskier mortgages, is being drawn up by the Treasury ahead of its scheduled launch in January.
"Sending a clear and simple statement to the public that the Bank will not tolerate house price rises above 5 percent would help restrict excessive price expectations across the country," the RICS report said.
"This policy would discourage households from taking on excessive debt out of fear of missing out on a price boom, and discourage lenders from rushing to relax their lending standards as they compete for market share."
Until recently the Bank only had one tool - interest rates - to deal with a surge in house prices.
Caps on loan-to-value ratios, loan-to-income ratios, or ceilings on the amount banks are permitted to lend could all be introduced should house price inflation rise above a chosen threshold, RICS said.
"It would be a speed bump, a warning indicator," said RICS chief economist Simon Rubinsohn told BBC radio. "What we're trying to do is manage the volatility in the market."
Rubinsohn acknowledged that the policy would need to have a regional dimension, reflecting the fact that price pressures in northern England and Wales were much weaker than in London.
Howard Davies, a former Bank deputy governor, said such a scheme would not tackle the root of the problem - the lack of new property development.
"The real problem is that we are not building enough properties," Davies said. "That is what we should be working on. I don't think a price cap across the country would work."
Housebuilding has picked up in recent months, thanks in part to the government's Help to Buy scheme, but is still running around 25 percent below its long-term average.
Data on Friday showed new construction orders were almost 20 percent higher in the second quarter than in the first, but economists say a more sustained increase will be needed just to keep pace with rising demand.
The Bank Governor Mark Carney has promised to be "vigilant" about the risk of another house price bubble and has indicated a preference to use more intensive supervision of lending, rather than interest rates, as an initial response.
Many countries have already used macroprudential tools to cool the housing market, including Canada between 2008 and 2012, when Carney headed the country's central bank.
(Reporting by Christina Fincher; editing by William Schomberg)