U.K. October House Prices Rise 1.8% to Erase Half September's Record Drop
U.K. house prices climbed in October, erasing almost half of the record drop posted the previous month as the government readies the biggest spending cuts since World War II.
The average cost of a home increased 1.8 percent to 164,919 pounds ($266,000) from September, when it declined 3.7 percent, Halifax said in an e-mailed statement today. Property values were unchanged from the same month a year earlier.
Data are painting a mixed picture about the health of the U.K. recovery before the Bank of England decides today whether to add more stimulus to the economy. While gross domestic product expanded twice as fast as economists had forecast in the third quarter, jobless claims rose the most in eight months in September and retail sales unexpectedly fell.
“An increase in the number of properties available for sale in recent months, together with a decline in demand, has put some downward pressure on prices in recent months,” Halifax economist Martin Ellis said in the statement. Still, “we do not believe that prices are set to fall sharply over a sustained period.”
The Bank of England will probably today keep its main interest rate at a record low of 0.5 percent and maintain the size of its bond stimulus plan at 200 billion pounds, according to Bloomberg News surveys of economists. It will announce its decision at noon in London.
The average price in the three months through October fell 1.2 percent compared with the previous three months. Halifax said the “underlying pace of house price growth has turned moderately negative in recent months.”
House prices are falling as more properties are put on sale and buyers’ appetite is hurt by the budget squeeze, which will wipe out half a million public-sector jobs.
Rightmove Plc, the operator of Britain’s biggest property website, said in October that home sellers raised asking prices 3.1 percent that month. Nevertheless, a survey by the company published Oct. 25 showed that the number of Britons who expect house prices to fall outnumbers those forecasting an increase. Some 32 percent of the 25,584 people surveyed said prices will be lower in a year.
Housing market activity “is softening,” Halifax said today. Banks approved 47,474 mortgages in September, less than half of the total at the peak of the 2007 property boom.
Still, “interest rates are likely to remain very low for an extended period, which will continue to support the improved mortgage affordability position for homeowners,” Halifax’s Ellis said. “Low rates and stable employment levels are benefiting homeowners.”
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