London House Prices Plunge as Financial Turmoil Takes Its Toll
London home sellers lowered asking prices by the most in a year in August as demand in Britain’s most expensive property market was hit by turmoil in financial markets, Rightmove Plc said.
Asking prices in the capital dropped 3.4 percent from the previous month, when they decreased 1.4 percent, the U.K.’s biggest property website said in an e-mailed report today. Nationally, values fell 2.1 percent, a second consecutive monthly decline and the largest since December.
“Prices often fall back at this time of year, but the renewed turmoil in global financial markets may be starting to hit home with London buyers who have thus far been insulated from the worst of the downturn,” Rightmove said.
While values are being supported by a lack of property supply and record low interest rates, waning consumer confidence and the potential impact on bank lending from an escalation of Europe’s debt crisis may undermine activity further, Rightmove said. U.K. business confidence fell last month and the recovery in the labor market will slow, separate reports published today showed.
National asking prices were down 0.3 percent in August from a year earlier to an average 231,543 pounds ($377,000), Rightmove said. That’s the first annual decline since September 2009. In London, prices were up 3.2 percent to 418,008 pounds.
U.K. stocks have plunged this month, with the FTSE 100 Index falling 9 percent amid a global selloff sparked by concern that Europe won’t be able to contain its debt crisis. Europe’s Stoxx 600 has fallen 11 percent.
Rightmove said the impact of the financial turmoil across the U.K. is “likely to be limited because prices are already bumping along the bottom.” In London, prices probably won’t continue to fall at the same rate as in August as the market “is seen internationally as a safe haven in times of financial upheaval,” it said.
Eight out of 10 regions in England and Wales tracked by Rightmove showed monthly declines in August, led by London and a 2.6 percent drop in southeast England. In the U.K. capital, all 32 boroughs saw prices fall. The Kensington and Chelsea district and Westminster both had a 2.9 percent decrease.
“With both buyers and sellers staying away from the market unless they are strongly motivated to move, we expect prices to stabilize with continuing subdued transaction volumes,” said Miles Shipside, commercial director of Rightmove, referring to the London market. “It remains to be seen whether the latest round of global financial jitters will affect the London market over the next few months.”
For the reports, Rightmove measured 102,031 prices for homes put on sale on its website between July 10 and Aug. 6. That accounts for about 90 percent of the market, it said.
U.K. business confidence weakened in July, BDO LLP said in a separate report, with firms seeing “little economic growth” over the next six months. Companies’ inflation expectations rose to the highest in almost three years.
An index of sentiment fell to 95.1 last month from 95.6 in June, while a gauge of estimated business output for the next three months fell to 95 in July from 96.3. A reading above 95 signifies expansion. A measure of factory production for the next quarter signaled contraction.
The Chartered Institute of Personnel and Development and KPMG LLP said the U.K. jobs recovery may “slow sharply” this quarter, citing a survey of more than 1,000 employers. An index measuring the difference between the proportion of employers that intend to hire and those that plan to reduce their workforce fell to minus 1 in the third quarter from 3 in the second quarter.
The recovery “continues to falter,” said BDO partner Peter Hemington. “The rapid decline of the manufacturing sector, championed as the key to a rebalancing of the U.K. economy, is alarming. And the services sector is showing little sign of picking up the slack.”
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