UK house prices see their steepest fall since 2001

Source : Business Times - 2 Sep 2008

End to property slump still some way off: research firm Hometrack

(LONDON) UK house prices fell by the most since at least 2001 in August as economic growth stagnated, and an end to the property slump is ’still some way off’, according to Hometrack Ltd.

Falling value: A couple browsing at the window of an estate agent in Didcot, Oxfordshire. The average cost of a residential property in England and Wales slipped 5.3 per cent from a year earlier to £167,000

The average cost of a residential property in England and Wales slipped 5.3 per cent from a year earlier to £167,000 (S$428,700), the London-based research company said in a statement yesterday. That’s the biggest annual drop since the index started seven years ago.

Prices fell 0.9 per cent from July.

‘A recovery in the housing slump, even back to zero monthly growth, is still some way off,’ said Richard Donnell, director of research at Hometrack.

‘It is confidence over the outlook for job prospects and the wider economy that is fundamental to any sustained turnaround in market conditions.’

Nationwide Building Society and HBOS plc reports show that the UK has entered its steepest property market slump since the early 1990s.

The Bank of England kept the benchmark rate unchanged in August as it weighed the fastest inflation in a decade against the threat of a recession.

The Royal Institution of Chartered Surveyors yesterday called for the government to take measures to revive the market for bonds backed by home loans in order to spur mortgage lending. The government should allow investors to swap the securities for Treasury bills with the Bank of England, RICS said in a statement.

Property values fell in each of the nine regions in Hometrack’s survey. In London, they dropped 1.1 per cent from July. The average time for a home to stay on the market rose to 11.3 weeks from 11 weeks, and the amount of the asking price achieved in sales fell to 90.7 per cent from 90.9 per cent.

‘When the market turns, it can take as long as 24 to 36 months for prices to reach realistic levels,’ Mr Donnell said. ‘We are now well into this process.’

House prices in Britain declined 10.5 per cent from a year earlier last month, the most since 1990, Nationwide said on Aug 20. HBOS said on Aug 7 that prices declined the most since 1983.

The flagging property market adds to signs that the UK may be entering its first economic contraction since 1992 after growth stagnated in the second quarter.

For manufacturers, orders fell to the lowest in three years, and companies expect a further deterioration, a separate report published yesterday by the EEF engineering lobby group showed.

Inflation accelerated to 4.4 per cent in July, more than twice the central bank’s target, making the Bank of England reluctant to cut interest rates to shore up the economy.

Societe General SA and Bank of America Corp predict that the central bank will start lowering interest rates by the end of this year.

The next interest rate decision is on Thursday. All 61 economists in a Bloomberg News survey expect no change this month. — Bloomberg