U.K. Home Prices Little Changed as Inflation, Income Squeeze Limit Demand
U.K. house prices were little changed in March as uncertainty about the strength of the recovery and a squeeze on incomes from accelerating inflation deterred buyers.
Values rose 0.1 percent in March from February to 162,912 pounds ($266,426), Halifax, the mortgage unit of Lloyds Banking Group Plc (LLOY) said in a statement in London today. From a year earlier, prices were down 3.2 percent.
Recent house-price data have been mixed and Bank of England data show mortgage growth remains constrained. While a lack of supply helped support home values, low consumer confidence and banks’ restrictions on lending are limiting sales. The Bank of England will tomorrow probably hold off raising its benchmark interest rate as a faltering recovery takes precedence over the highest inflation rate in more than two years.
“Uncertainty over the general economic outlook and individual financial circumstances are likely to constrain housing demand, resulting in some modest downward pressure on prices,” Martin Ellis, a Halifax economist, said in the statement. He sees prices falling 2 percent this year.
In the three months through March, prices fell 0.6 percent compared with the previous quarter, according to Halifax. Values dropped 2.9 percent on the year, the biggest annual decline since October 2009.
Hometrack Ltd. said last week that U.K. house prices fell for a ninth month in March as growth in the supply of homes for sale outpaced demand. The same day, Nationwide Building Society reported that house prices unexpectedly rose for a second month as prospective sellers’ reluctance to put their homes on the market propped up values.
A Bank of England report last week showed mortgage approvals rose to 46,967 in February, the highest level since November. That’s still only about half the average level recorded over the last decade.
The central bank’s Monetary Policy Committee will leave its key rate at a record low of 0.5 percent tomorrow, according to all 57 economists in a Bloomberg News survey. It will also keep its bond-purchase plan at 200 billion pounds, said all 32 economists in a separate poll. The key rate has been at a record low since March 2009.
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