U.K. House Prices Decline Most in Six Months, Nationwide Says
U.K. House Prices Decline Most in Six Months, Nationwide
Jason Alden/Bloomberg
U.K. house prices fell the most in six months in August.
U.K. house prices fell the most in six months in August. Photographer: Jason Alden/Bloomberg
U.K. house prices fell the most in six months in August as increased supply of property gave buyers more bargaining power, Nationwide Building Society said.
The average cost of a home dropped 0.9 percent from July, when they fell 0.5 percent, to 166,507 pounds ($257,519), Britain’s biggest customer-owned lender said in an e-mailed statement today. From a year earlier, prices increased 3.9 percent, the weakest pace since November.
The U.K. housing-market recovery has faded this year as the prospect of the biggest budget squeeze since World War II undermined consumer confidence and spooked potential homebuyers. Hometrack Ltd. said on Aug. 30 that there is a “growing weakness” in demand that represents “more than just a seasonal blip.” Its index showed prices fell 0.3 percent last month.
“As more sellers have returned to the market, buyers have a greater selection of properties to choose from and more bargaining power with which to bid down asking prices,” Nationwide Chief Economist Martin Gahbauer said in the statement. “Given that the price increases of the last year had gotten ahead of the recovery in the wider economy, the current correction is not an unhealthy development.”
While the U.K. economy grew at the fastest pace since 2001 in the second quarter, there are signs the recovery is moderating. Manufacturing grew at the slowest pace in nine months in August, a report by Markit Economics and the Chartered Institute of Purchasing and Supply showed yesterday.
‘Fragile’ Economy
Bank of England Deputy Governor Charles Bean said last week that Britain’s economy “remains fragile” and more policy action may be required to boost growth. Mortgage approvals remain at about half the level seen at the peak of the housing boom in 2007, as banks ration credit.
In its report on Aug. 30, Hometrack said that the property market is enduring a “modest re-pricing” that may last for up to a year. Gahbauer said the decline in house prices is “likely to remain relatively modest” as there is “little evidence” of people being forced to put their homes up for sale.
Nationwide also said that the proportion of borrowers on fixed interest-rate mortgages declined to 36 percent in the first quarter of 2010 from 48 percent at the end of 2008 because of “attractive” variable rates. While this leaves borrowers exposed to increases in interest rates, Nationwide said it expects the Bank of England to keep its benchmark interest rate on hold until “well into 2011.”
A separate report today from real-estate adviser Knight Frank LLP showed that London luxury-home prices increased an annual 16 percent in August, the slowest since January. Values fell 0.1 percent from July, the second consecutive monthly decline.
To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net
Rate These Stories
Rate this Page