London Home Prices May Reach New Record on Haven Status: Economy
London house values rose to a record this month and the city’s property market may be further boosted as investors seek a haven from the euro-area debt crisis, according to Rightmove Plc. (RMV)
The average asking price in the U.K. capital rose 0.9 percent from April to 469,314 pounds ($742,500), the most since the operator of Britain’s biggest property website started keeping the data in 2002, it said today. Nationally, values were unchanged in May from the previous month.
“The Greek situation means that other countries may well be undermined and you might get a domino effect of people looking to actually put their cash into a safe haven,” Rightmove commercial director Miles Shipside said on Bloomberg Television. “Obviously, as the euro depreciates, the U.K. gets slightly more expensive, but perhaps it’s a better option than what’s facing them in their own countries.”
The pound and U.K. government bonds are already benefiting from haven status as turmoil in Europe threatens to force Greece out of the euro area and engulf Spain. The pound has gained 3.2 percent this year, the most among 10 developed-market peers, data compiled by Bloomberg show, while the yield on the 10-year gilt is close to a record low.
Nationally, Britain’s property market may remain under pressure as the economy struggles to shake off its first double- dip recession in almost four decades, banks curtail lending and consumer confidence remains weak.
The average asking price in England and Wales was little changed at 243,759 pounds this month, Rightmove said. Normally, sellers usually try to take advantage of a spring pickup in house hunting and values have risen on average 1.5 percent in May in the past 11 years, Shipside said. The end of a tax exemption in March for first-time buyers of homes costing less than 250,000 pounds has damped demand nationally, he said.
In London, the increase was led by a 2.5 percent increase in Sutton and a 2.4 percent gain in Greenwich. The end of the stamp-duty holiday was “less of an issue” in London since just three boroughs had an average asking price below the exemption threshold, Rightmove said.
The number of British properties coming to market dropped 10 percent in May from April, today’s Rightmove report showed. Five of 10 regions tracked by Rightmove showed declines in asking prices from the previous month, led by a 2 percent drop in southwest England. London led the increase among the regions that showed gains.
In a separate report today, the Council of Mortgage Lenders said U.K. gross mortgage lending dropped 19 percent to 10.2 billion pounds in April. Rightmove said it’s a “cause for concern” that the market has lost its momentum as there is likely to be a longer-than-usual slowdown in the summer due to an extra bank holiday in June to mark Queen Elizabeth II’s Diamond Jubilee and the London Olympic Games in August.
“Euro zone developments are highly uncertain and have the potential to undermine U.K. economic prospects and conditions in our housing and mortgage markets,” CML chief economist Bob Pannell said. “The underlying picture is likely to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad euro-zone news.”
Group of Eight leaders on May 19 urged Greece to stay in the euro area as polls in the country showed a close race between parties supporting and opposing its bailout deal. With the country preparing for a second ballot on June 17, renewed concerns about the currency area were fanned last week as Spain revised its 2011 deficit upward -- even as borrowing costs approached levels that prompted bailouts in Greece, Ireland and Portugal.
German Finance Minister Wolfgang Schaeuble will, for the first time, discuss the euro at a meeting with his newly installed French counterpart, Pierre Moscovici, in Berlin today as European Union leaders prepare to meet in Brussels on May 23.
In the U.K., the British Retail Consortium said today that visits to U.K. stores fell 2 percent in the three months through April compared with a year earlier. With inflation continuing to outpace wage increases, consumers’ real spending power for non- essential items fell 0.9 percent in April from a year earlier, the equivalent of 100 pounds, Lloyds TSB said. Income growth was its weakest since February last year.
Separately, euro-area construction output rebounded in March, rising 12.4 percent after a 10.4 percent drop in February.
In the U.S., the Federal Reserve Bank of Chicago will publish its national economic activity index for April. Atlanta Fed President Dennis Lockhart said in Tokyo today that policy makers need to retain the option of starting a new round of bond buying to spur the U.S. economy.
“As popular as it might be in some quarters to rule out” a third round of so-called quantitative easing, “I do not think this option can be taken off the table,” Lockhart said. “QE3 will work under the right circumstances. But I don’t believe such circumstances prevail at this time.”
China should adopt a “proactive fiscal policy and a prudent monetary policy” to bolster the world’s second-largest economy, Premier Wen Jiabao said, according to remarks published yesterday by the official Xinhua News Agency. China may announce stimulus actions in the near term, according to a front-page commentary today in the China Securities Journal, which is published by Xinhua.
Elsewhere in Asia, Thailand’s gross domestic product unexpectedly expanded 0.3 percent last quarter from a year earlier, compared with the median forecast for a 0.5 percent decline.
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