U.K. Home Sellers Cut Prices as Recovery in ‘Paralysis’: Economy
Average asking prices in England and Wales fell 0.8 percent from December to 224,060 pounds ($343,000), the lowest in a year, the operator of Britain’s biggest property website said in London today. In the capital, values gained 0.8 percent.
U.K. property prices may remain under pressure as unemployment rises and euro-region turmoil threatens economic growth. Ernst & Young LLP’s ITEM Club said today that Britain has slipped back into a recession and Europe’s inability to end the debt crisis has had a “debilitating effect” on the U.K., which is in a “state of paralysis.”
“It really depends how long the euro-zone crisis drags on,” Andrew Goodwin, senior economic adviser to the ITEM Club, said on Bloomberg Television’s “Countdown” today. “What we have to see happen is some form of resolution, which then stabilizes confidence and gets consumers and businesses spending. That’s not going to be instantaneous.”
European leaders will meet for a summit on Jan. 30 to try to end the turmoil. Standard & Poor’s cut the ratings on nine of the region’s sovereigns on Jan. 13. Citigroup Inc. said today that Britain’s top credit rating is “secure for now,” saying the U.K. faces less risk of having to support euro-area countries and banks ensnared in the debt crisis and because of the government’s commitment to budget cuts.
“There’s no doubt that the crisis in the euro zone is extremely challenging for Britain,” Chancellor of the Exchequer George Osborne said in an interview with Bloomberg Television in Hong Kong today. “But actually some of the more recent economic indicators over the turn of the year, some of the survey data for services, manufacturing and construction, has actually been pretty positive.”
ITEM Club said Britain’s economy will probably shrink in the current quarter after contracting in the last three months of 2011. It cut its 2012 growth forecast to 0.2 percent from 1.5 percent. Data on Jan. 18 will show jobless claims probably increased by 7,000 in December, according to the median of 25 estimates in a Bloomberg survey.
The FTSE 100 Index was little changed at 5,633.95 as of 11:35 a.m. in London. Europe’s Stoxx 600 Index rose 0.2 percent after earlier falling as much as 0.5 percent. Today is a public holiday in the U.S.
In Australia, data today showed home-loan approvals rose in November for an eighth month as the central bank’s first interest-rate reduction in two years helped attract first-time buyers. In Asia, Japan’s machinery orders rebounded in November from a month earlier by more than economists estimated, signaling the world’s third-largest economy is showing some resilience to the global growth slowdown.
China’s economy probably grew 8.7 percent in the fourth quarter from a year earlier, which would be the weakest in more than two years, according to the median forecast of 26 economists surveyed by Bloomberg News. The data are scheduled for release tomorrow in Beijing.
While Rightmove said there are signs of “pent-up demand” for U.K. property, a lack of mortgage finance may limit sales. Mortgage approvals were little changed in November and banks expect to toughen lending terms in the first quarter because of strains in funding markets related to the euro crisis, according to the Bank of England.
Searches on Rightmove’s website rose 27 percent from a year earlier to more than 44 million in the first 10 days of the year, the highest since it was started in 2000.
“While this doesn’t necessarily indicate a surge in proceedable buyer numbers, it does highlight a strong pent-up demand to move,” the company said. “The market is stuck in a low transaction volume pit that will be hard to escape from without the mortgage funding.”
“The market will remain challenging and fragmented during 2012,” it said.
Out of the 10 regions in England and Wales tracked by Rightmove, six posted declines this month, led by a 3.5 percent drop in southwest England. Excluding London (RMREGL), prices in the other nine areas fell an average of 1.5 percent from December.
From a year earlier, prices nationally rose 0.4 percent in January, the company said. In London, they surged 6.1 percent.
London prices will probably continue to outperform other regions in 2012, according to Rightmove. The number of new listings in the capital fell to its lowest level in three years in the first week of January, an “early indication that a shortage of sellers and upwards price pressure will again feature in 2012,” it said.
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