U.K. house prices fell in June as the economy struggled to rebound from a recession and the end of a tax break continued to weigh on demand, Nationwide Building Society said.
Prices dropped 0.6 percent from May, when they rose 0.2 percent, the Swindon, England-based lender said in an e-mailed report today. From a year ago, prices fell 1.5 percent to an average 165,738 pounds ($258,000). The annual decline is the biggest since August 2009.
Data from the British Bankers’ Association yesterday showed net mortgage lending fell in May for the first time in at least 15 years and approvals for home loans declined. With the economy struggling to recover, the Bank of England and the Treasury will announce within weeks details on a new program to get banks to boost lending.
“Economic conditions are expected to remain challenging over the next 12 months,” Nationwide Chief Economist Robert Gardner said in the report. “However, policy makers’ efforts to bolster the supply of credit to the economy and to help lower the cost should provide support to demand.”
Lenders granted 30,238 loans to buy homes in May, down from 32,103 in April, according to the BBA. That’s the lowest since April 2011. While gross mortgage lending rose to 7.9 billion pounds in May from 7.6 billion pounds, it was below the average for the previous six months as the housing market “continued to see subdued activity.”
High unemployment, weak consumer confidence and tight lending conditions are undermining demand for homes in the U.K. A Bank of England survey in March showed lenders expected the availability of both secured and unsecured credit to households to decrease in the current quarter.
The current weakness in the housing market may also reflect the ending of a tax break for first-time buyers in March, Nationwide said. That exemption, on homes costing less than 250,000 pounds, boosted demand at the start of the year.
On the outlook for property values, Gardner said he expects to see a “continuation of the pattern experienced over the past two years, with prices remaining fairly stable over the next 12 months.” Mortgage lender Halifax said on June 7 that prices rose 0.5 percent in May. It forecast little change in prices for the remainder of the year, citing the “ongoing tough economic environment.”
Data today may confirm an earlier estimate that the economy shrank 0.3 percent in the first quarter, putting the U.K. into its first double-dip recession since the 1970s. The Office for National Statistics will publish the data at 9:30 a.m. in London.
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