A U.K. house-price index stayed negative in May as the crisis in Europe and the end of a tax exemption for first-time buyers limited demand, the Royal Institution of Chartered Surveyors said.
The gauge rose to minus 16 from minus 19 in April, which was a six-month low, London-based RICS said today, citing a monthly poll of property surveyors. A reading below zero means more surveyors saw price drops than gains last month. A measure of demand fell to a four-month low.
The U.K. economy has slipped back into a recession as the debt crisis worsens in Europe, where Spain was forced to seek aid for its banking system. The Bank of England held its bond-purchase plan at 325 billion pounds ($505 billion) last week and its key interest rate at a record low of 0.5 percent as policy makers assess inflation risks in the economy.
“Ongoing economic instability in the U.K. and overseas has continued to undermine consumer confidence,” Peter Bolton King, a spokesman for RICS, said in the statement.
A measure of new buyer inquiries dropped to minus 1 from 5, the lowest since January, and a gauge of sales expectations fell to 9 from 14, the report said. Over the past three months, the price indexes for 11 of 12 regions tracked by RICS showed declines, with Northern Ireland showing the lowest measure, at minus 54. The exception was London, where the gauge was plus 44.
Demand for homes was boosted earlier this year as first-time buyers took advantage of a tax exemption on purchases of homes costing less than 250,000 pounds before it ended March 24. The expiry has created “a clear loss of momentum” in the property market, RICS said.
Other property-price measures have shown improvement in the past month. Nationwide Building Society said values rose 0.3 percent in May, while property researcher Hometrack said prices increased 0.2 percent. Lloyds Banking Group Plc’s Halifax division said prices rose 0.5 percent, though the market may stagnate in the second half due to the “ongoing tough economic environment.”
In a separate report, KPMG LLP and the Recruitment and Employment Confederation said their index of hiring of full-time staff dropped to a five-month low of 51 in May from 51.9 in April. An index of hiring of temporary workers slipped to 47.5, the lowest since July 2009, from 48.2. Readings below 50 indicate contraction.