New Data Raise Fears on British Economy
Fresh signs of a slowdown in Britain's economy emerged this weekend, as new data revealed that house prices fell for the third consecutive month in December, while the British Retail Consortium warned that heavy discounting on the high street may have made for a much less merry Christmas than retailers had been hoping for.
According to new figures from the housing analyst Hometrack, released today, the price of the average home in the UK was down by 0.3 per cent during December, the worst decline in a single month since January 2005.
The falls, combined with dec-lines in both October and Nov-ember, have reduced the annual rate of house price inflation to just 3 per cent, according to Hometrack, less than half the growth recorded during 2006.
The latest report on the state of the housing market is broadly in line with similar analysis published in recent weeks by Halifax Bank, Nationwide Building Society and the Royal Institute of Chartered Surveyors (Rics). However, in addition to the headline figure showing falling prices, the Hometrack survey also reveals a series of worrying signs about a continuing decline in the housing market.
In particular, the group said the average time taken to sell a property has now risen to 8.3 weeks, the longest period Hometrack has recorded since it began monthly audits of the market in 2001. The analyst also said that house price falls were no longer confined to previous market hot spots, with estate agents across 30 per cent of the country recording falling prices.
Meanwhile, the BRC said that in spite of shoppers turning out in their droves on to Britain's high streets over the past few days, the early indications are that many retailers have been forced to chop their prices, and subsequently, their margins -- as consumers have started to keep a closer eye on how much money they are spending.
"After a very slow start, the Christmas rush finally kicked in in the last 10 days of shopping," said Kevin Hawkins, the BRC's director general. "But a lot of that was driven by discounting, good for customers but bad for those retailers who've seen their margins squeezed in a crucial month.
"Overall retail sales will certainly be up on last year, but, with customers' finances under more pressure than 12 months ago, retailers will have done well to beat last December's year-on-year growth of 2.5 per cent.
"There will be sharp differences between retail's winners and losers. Those that got it right on price and availability should have done well. Department stores and those in shopping centres have also benefited as cold weather has made some high streets less attractive. But others, especially those without a distinctive offer or who are less able to afford discounts, have struggled."
Dolcis, the shoe retailer, looked to be one of the first casualties of the consumer slowdown, as reports emerged at the weekend that it was in emergency restructuring talks with its advisers. The company has struggled over the past few years, slipping to a £2m loss in 2005, and thenalmost trebling its pre-taxlosses to just under £6m in the 12 months to January 2007. It is now believed to have drafted in a new set of advisers to help it decide on a range of options for the business.
Commenting on the slowdown in the housing market, Richard Donnell, Hometrack's director of research, said the fortunes continued to differ hugely from region to region.
"The first half of the year saw the momentum in house price inflation that built up over 2006 carried into 2007 -- the real impetus behind the headline rate of growth came from the central London market, as well as the key commuter routes of southern England, where values were being driven ahead by a lack of supply and strong demand," Mr Donnell said.
"The second half of the year has seen a major reversal in confidence on the back of higher interest rates and concerns over the outlook for the financial markets. The greatest turnaround in market conditions has been in southern England, where the market is slowing off a high base."
Hometrack said it expected the housing market to continue to slow during 2008, despite this month's base rate cut from the Bank of England's Monetary Policy Committee. It predicted house prices would rise by 1 per cent next year, broadly in line with forecasts from Nationwide, which is expecting no rises at all, and Rics, which has suggested that prices will rise by 3 per cent.