Bloomberg News

U.K. House Prices Stagnate on Subdued Demand, Hometrack Says

July 01, 2012

U.K. House Prices Stagnate on Subdued Demand, Hometrack Says

The British property market is struggling to pick up as tight lending conditions, high unemployment and falling consumer confidence curb demand. Photographer: Jason Alden/Bloomberg

U.K. house prices stopped rising in June for the first time in four months as economic uncertainty and a seasonal slowdown curtailed activity in a market that now faces “downward pressure,” Hometrack Ltd. said.

Prices stayed unchanged from May, the London-based property-research company said in an e-mailed report today. The number of new buyer registrations fell 0.5 percent, the first drop in five months, while the volume of properties being put up for sale rose 1.5 percent.

The British property market is struggling to pick up as tight lending conditions, high unemployment and falling consumer confidence curb demand. Economists predict Bank of England policy makers will probably increase the size of their so-called quantitative easing program this week as the worsening crisis in Europe impedes the U.K.’s return to growth.

“As we move into the summer months, the traditional seasonal slowdown will ensure that demand remains subdued,” Richard Donnell, director of research at Hometrack, said in the report. “As a consequence, we expect the balance between supply and demand to widen, with house prices set to come under renewed downward pressure over the second half of the year.”

On the month, London was the only one out of 10 areas tracked by Hometrack that showed a price gain in June, with a 0.3 percent increase. From a year earlier, values nationally fell 0.5 percent.

Britons repaid more mortgage debt than they borrowed in May for the first time in at least 15 years as consumers sought to improve their finances, the British Bankers’ Association said on June 27.

Less Pessimism

A separate survey today by Lloyds Bank showed U.K. companies became less pessimistic about the economic outlook in June. The index of sentiment rose to minus 12 from minus 21 in May, the unit of Lloyds Banking Group Plc (LLOY) said in an e-mailed statement in London.

The bank questioned 300 companies with sales exceeding 1 million pounds ($1.57 million) between June 6 and June 15.

The Bank of England’s Monetary Policy Committee, led by Governor Mervyn King, will raise its target for bond purchases by 50 billion pounds to 375 billion pounds on July 5, according to 30 of 41 economists in a Bloomberg news survey. Eight predict an increase to 400 billion pounds, and the rest see a smaller increase or no change.

Forty-nine of 50 economists in a separate Bloomberg survey see no change next week in the benchmark rate from the record low of 0.5 percent. One economist, Tom Vosa at National Australia Bank, forecasts a cut to 0.25 percent.

King said last week that Europe’s debt turmoil has stoked uncertainty and tightened credit availability, creating headwinds to Britain’s recovery from recession.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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