U.K. House Prices Rise to Three-Year High as Holidays Curb Property Supply
U.K. home sellers raised asking prices to the highest since June 2008 this month after public holidays in April limited the supply of property for sale.
Average asking prices rose 1.3 percent from the previous month to 238,874 pounds ($388,700), London-based Rightmove Plc, the operator of the U.K.’s biggest property website, said in a report today. From a year ago, prices are up 0.7 percent.
Britain’s property market is struggling to build momentum as banks limit lending and it has limited scope to withstand higher interest rates, Rightmove said. Two consecutive four-day weekends to mark the Easter holiday and the wedding of Prince William to Kate Middleton undermined potential sellers’ willingness to list their property with realtors.
“The market has failed to build up a head of steam due to continuing red signals from mortgage lenders,” Miles Shipside, commercial director of Rightmove, said in a statement. A drop in new listings means “there seems to have been a knee-jerk reaction pandering to sellers’ pricing aspirations rather than accommodating the reality of low buyer numbers.”
The weekly rate of new listings in the two weeks around the public holidays fell to about 20,000 from an average of 29,000, Rightmove said. The average number of unsold properties per real-estate agent rose to 76, the highest ever for May, from 74.
Eight of 10 regions in England and Wales tracked by Rightmove showed gains, led by a 5.9 percent increase in the East Midlands. Average asking prices in London were unchanged on the month, and the only area to show a decline was Yorkshire and Humberside, which dropped 1.3 percent.
Recent property-market data have been mixed. The Royal Institution of Chartered Surveyors said May 10 its house-price gauge rose to the highest level in nine months in April. Lloyds Banking Group Plc (LLOY)’s Halifax division said a day earlier prices fell 1.4 percent, the most in seven months.
Bank of England data this month showed lenders granted 47,775 home loans in March, less than half the levels seen around the peak of the housing boom at the end of 2006. The central bank left its benchmark interest rate on hold at a record low of 0.5 percent this month.
“One interest-rate rise won’t immediately derail the market but if we see several in quick succession it will quickly hit the buffers,” Shipside said.
Households are already under pressure from the government’s fiscal squeeze and inflation that’s twice the central bank’s 2 percent target. A report today by Ernst & Young’s ITEM Club showed rising prices and slow wage growth will limit the increase in consumer spending to 0.6 percent in 2011 and 1.3 percent in 2012. The pre-recession annual rate was 3.3 percent.
“The squeeze on household budgets is only going to intensify this year,” said Andrew Goodwin, an economist at Item Club. “It will be 2013 before consumers are really able to start enjoying the recovery. However, even then consumers are going to be much more cautious in their spending habits.”
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