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House building picks up across Britain, but not fast enough - RICS

A construction worker stands on a 'cherry picker' at a housing development project in south London August 6, 2013. REUTERS/Andrew Winning

LONDON (Reuters) - House building in Britain is making its strongest recovery in more than 15 years, but supply is still failing to keep pace with demand, according to the Royal Institution of Chartered Surveyors.

In the third quarter of this year, a net balance of 41 percent of surveyors reported a rise in privately-funded housing projects. That was up from 31 percent in the second quarter and the highest since the survey began in 1998.

The government is likely to seize on the survey as evidence that its controversial "Help to Buy" mortgage subsidies are boosting supply, and not just prices. But the industry body reckons the sector is merely recovering from a low base and still playing catch-up with the growth in household formation.

"While it's certainly good news that construction - and especially house building - is finally on the rise right across the UK, we are certainly not out of the woods yet," said the institution's chief economist, Simon Rubinsohn.

"Critically, we're still way behind in terms of building enough homes to meet the nation's growing housing need and overall construction projects are at a historical low."

The construction industry was the part of the economy worst hit by the financial crisis, and housing completions are still running more than 40 percent below their early 2007 peak.

Britain has strict planning regulations and homebuilders have blamed a scarcity of land for development as the main obstacle to new building work.

The survey published on Tuesday also showed skill shortages and difficulties in sourcing building materials, highlighting the industry's relatively slow response to demand.

A shortage of affordable housing has become a major political issue at a time when house prices are rising twice as fast as inflation. Property prices in London are rising even faster, at an annual rate of more than 10 percent, according to the Office for National Statistics.

The opposition Labour party has pledged to double the current rate of house building to more than 200,000 a year. Economists believe the annual rate of household formation is between 220,000 and 240,000.

(Reporting by Christina Fincher; Editing by Ruth Pitchford)