London home sellers cut asking prices by the most for a December in five years as an influx of supply and seasonal factors undermined pricing power.
Asking prices fell 4 percent from the previous month to an average 464,398 pounds ($752,000), property website Rightmove Plc (RMV) said today. Average prices in England and Wales fell 3.3 percent, the most since January 2002. Rightmove said the decline in London may be a portent of a “less frothy” market in 2013.
The U.K. property market is struggling to gain momentum as a squeeze on mortgage lending and a weak economic recovery deter buyers. The Bank of England is counting on its Funding for Lending Scheme to stoke borrowing, and Rightmove forecasts competition among lenders will help lift U.K. house prices by 2 percent next year.
There will be a “marginal but encouraging boost to mortgage lending giving the wider market a generally more positive outlook next year,” said Miles Shipside, director at Rightmove. “This will be particularly welcomed by frustrated first-time buyers.”
This was echoed in a separate report by the Building Societies Association today, which showed that U.K. consumers are finding it easier to get a mortgage than at any time since the organization started measuring home-loan availability in 2008. Only 45 percent of people surveyed cited mortgage availability as a barrier to property buying in December, compared with 57 percent in the same month last year.
Nevertheless, almost three-quarters of respondents who hadn’t bought a home yet said they still believed they would be living with family or renting by the end of next year, with 59 percent citing saving for a deposit as the biggest obstacle to property purchase.
“Buyers and lenders alike are adjusting to a new kind of normal in the U.K. housing market,” the BSA’s head of mortgage policy, Paul Broadhead, said in the statement. “The headwinds generated by a weak economic environment mean that it is here to stay right now.”
New London listings rose 10 percent in December from a year earlier, and a continued flow of sellers would help to support “more competitive” pricing next year, according to Rightmove. Monthly declines in the capital were led by a 6.5 percent drop in Tower Hamlets and a 4.8 percent decline in Hounslow.
In London, asking prices are still up 6.8 percent from a year earlier, compared with a national increase of 1.4 percent.
The strength of the city’s property market in 2012 “stood out like a beacon compared to most of the U.K.,” Rightmove said. Shipside said the “London bubble will continue to inflate, albeit more slowly than in recent years.”
Rightmove said the number of new property listings across the country will probably remain around the 1.2 million level seen in each of the last three years, and that may help to support values. Nationally, the average price was 228,989 pounds in December.
Nine of the 10 regions tracked by Rightmove posted declines in December from the previous month, led by a 5.3 percent drop in the southwest. The only increase was a 0.8 percent gain in the East Midlands.
The Bank of England said this month that banks drew down 4.36 billion pounds from the FLS in August and September, the plan’s first two months of operation. Lenders have 18 months to tap the program.
Policy makers held their bond-purchase plan at 375 billion pounds and their key interest rate at a record low of 0.5 percent on Dec. 6 as they monitored the impact the FLS. The BOE will publish the minutes of that meeting on Dec. 19.
In Asia, Japan’s Liberal Democratic Party won a two-thirds majority in yesterday’s election, smoothing the path for fiscal stimulus in early 2013 as incoming Prime Minister Shinzo Abe seeks to end the economy’s contraction.
China said it will seek a higher “quality and efficiency” of growth next year, signaling new leaders may accept a reduced pace of expansion in exchange for a more sustainable model, according to the state-run Xinhua News Agency.
-- With assistance from Svenja O’Donnell in London. Editors: Andrew Atkinson, Eddie Buckle
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