UK home prices up 0.6% this month

Source : Business Times – 21 Jul 2009

British home sellers raised asking prices this month to meet increased demand from buyers, Rightmove plc said.

The average cost of a home rose 0.6 per cent to &pound227,864 (S$538,970) after falling 0.4 per cent in June, the operator of the UK’s biggest residential property website said yesterday.

Prices in London had the first annual gain of the year so far.

The housing market is showing signs of recovery from the worst economic contraction in a generation after officials rescued banks and started printing money. Ernst & Young’s Item Club yesterday raised its forecast for British gross domestic product in 2010 to show expansion.

‘With growing confidence that we’ve passed the bottom, buyers are more active, although they may discover that many of the best buys have gone,’ Miles Shipside, commercial director of Rightmove, said.

Separate reports yesterday showed the mortgage market has improved. Gross lending rose 17 per cent in June from the previous month to &pound12.3 billion, the Council of Mortgage Lenders said. The Bank of England said approvals by the nation’s six biggest banks rose to 51,100 in June, the highest since records began in December, from 45,000 in May.

Seven of 10 regions tracked by Rightmove rose this month, led by East Anglia, where asking prices increased 6.1 per cent. Across England and Wales, values declined 3.1 per cent from a year ago.

The average number of properties available for sale at each real estate agent fell to 70 from 71 in June. At the same time the number of people looking at property listings on the website is ‘much higher than we would expect’ for this time of year, Rightmove said.

In the capital prices rose 1.4 per cent on the month and 0.6 per cent from a year earlier. Westminster led gains from June, with a 5.2 per cent increase, followed by Croydon and Camden.

The Bank of England has cut the benchmark interest rate to a record low of 0.5 per cent and is buying &pound125 billion of bonds with newly created money to ease lending strains. Prime Minister Gordon Brown has spent billions of pounds rescuing banks.

‘With only seven volume lenders remaining in the lending game, including three government-backed institutions that are prioritising their balance sheets over new lending, we are set to bump along the bottom for some time yet,’ Shipside said.

The economy will grow 0.5 per cent next year, up from a previous forecast for a 0.1 per cent contraction, the Item Club, which uses the same forecasting model as the UK Treasury, said yesterday. It predicts gross domestic product will drop 4.4 per cent this year, more than an earlier estimate for 3.5 per cent.

Repossessions may total 17,494 in the third quarter, up from 17,049 in the three months through June as higher unemployment leaves more Britons unable to afford their mortgages, according to a separate report by Property Portfolio Rescue, a London-based company that buys homes from distressed sellers.