London Home Sellers Raise Prices, Defy Economic Gloom
London home sellers raised asking prices by the most in six months in October as owners across the U.K. brushed off the challenges posed by the biggest fiscal squeeze since World War II, Rightmove Plc said.
Average asking prices in the capital increased 5 percent from September to 418,778 pounds ($671,301), the most since February, the operator of Britain’s biggest property website said in a report published in London today. Across the U.K., prices rose 3.1 percent to 236,849 pounds.
The report contrasts with data from Halifax on Oct. 6 showing U.K. house prices plunged in September by the most since at least 1983. While Ernst & Young LLP’s Item Club predicted today that the housing market “clearly looks” as if it is heading for a double dip, Bank of England policy maker Andrew Sentance said last week that price declines were a sign of “volatility” rather than a renewed property slump.
“It’s seemingly illogical against all the poor market fundamentals that new sellers coming to the market after the summer break should actually put their prices up,” Miles Shipside, commercial director of Rightmove, said in a Bloomberg Television interview today. “It shows that despite the economic difficulties we’re going through, they’re finding it hard to adjust to the new market and the different fundamentals.”
While the U.K. economy grew at the fastest pace in nine years in the second quarter, recent data indicates the recovery is weakening. Manufacturing growth slowed in September, jobless claims rose and Nationwide Building Society’s consumer- confidence gauge fell to an 18-month low as Britons braced for the government’s spending cuts to reduce the budget deficit.
Rightmove said the weekly rate of new properties on the market rose 11 percent in October from a year earlier. With banks still rationing credit, sellers may have to accept lower offers amid “greater competition” for buyers, it said.
The “fundamentals remain unsupportive” for the housing market, Ernst & Young said in a report published today. It expects prices to decline into 2011 and said the recovery “will be slow.”
Recent house-price data has been mixed. Halifax, the mortgage-lending division of Lloyds Banking Group Plc, said on Oct. 7 that values plunged 3.6 percent in September. By contrast, Nationwide said values rose 0.1 percent last month.
Areas with a greater proportion of government employees are likely to “take a disproportionately hard knock over the coming months” as the public spending cuts are implemented, according to property website Zoopla.co.uk. In England, Oxford and Cambridge will be most affected, while the City of London will be least hurt, according to an e-mailed statement today.
In London, demand from abroad may help support property values there, Rightmove’s Shipside said.
“Cash buyers are more the norm than the exception in many areas of London,” he said. “With agents reporting a flurry of buyers from Greece and Italy seeking safe investment havens for their cash, London’s international popularity will prevent top- end prices suffering as much as the rest of the country.”
“There can be little doubt that many sellers are ‘trying it on’ and deliberately asking inflated prices,” Howard Archer, chief European economist at IHS Global Insight in London, said in an e-mail today. “We expect house prices to trend down relatively gradually over the final months of 2010 and in 2011 to lose around 10 percent.”
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