U.K. Home Prices Decline as Property Demand Drops Most in Almost Two Years
U.K. house prices fell for a fifth month in November as demand for property dropped the most in almost two years, Hometrack Ltd. said.
The average cost of a home fell 0.8 percent from October to 155,000 pounds ($242,900), the London-based property researcher said in an e-mailed statement today. Demand for homes, measured by the change in new buyers registering with real-estate agents, fell 4.3 percent, the biggest decline since January 2009.
The report adds to evidence of a weakening property market after Rightmove Plc said on Nov. 15 that home sellers cut asking prices by the most since 2007 this month and U.K. banks approved the smallest number of mortgage since 2009 in October. The government has announced the biggest budget squeeze since World War II and officials have warned the cuts may harm the recovery.
“Concerns over the economic outlook on the back of recent spending cuts, together with widespread expectations that house prices are set for a period of retrenchment, are driving the continued weakness in demand,” Richard Donnell, Hometrack’s director of research, said in the statement. “In the near term we expect demand to remain weak and this will continue to put downward pressure on prices.”
Price declines were led by London, Wales, as well as England’s south east, West Midlands and north east regions, which all posted a fall of 0.9 percent, Hometrack said. Values in southern England, which posted the strongest recovery after the recession, are under the greatest pressure, it said.
The average time a property stays on the market before being sold climbed to 9.8 weeks in November, the longest since May 2009. Sellers in Wales and England’s East Midlands and north west regions have to wait more than three months.
The housing market has weakened as banks tightened lending criteria, causing the level of home loans to drop below half of that seen at the peak of the property boom in 2007. Mortgage approvals fell to 30,766 in October, the fewest since March 2009, the British Bankers’ Association said on Nov. 23.
While an increase in the supply of homes for sale in the past six months has helped push values down, Hometrack said the pace of properties being put on the market is expected to slow. That trend will help limit the fall in the average house price to 2 percent in 2011, it said.
While the U.K. economy posted its strongest two consecutive quarters of growth in a decade, Bank of England Governor Mervyn King said this month that the pace of expansion will slow. The country’s Office for Budget Responsibility is due to publish updated economic forecasts at 1 p.m. in London.
The budget squeeze is also restraining consumer spending. A separate report today showed that sales at consumer-services companies such as hotels and bars unexpectedly fell in the past three months. The number of firms saying sales volumes fell in the quarter exceeded those seeing gains by 18 percentage points, according to a survey by the Confederation of British Industry.
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