Bloomberg News

U.K. Home Prices Rise as Halifax Sees Stagnating Market

January 07, 2013

U.K. Home Prices Rose for Second Month in December, Halifax Says

House prices were 0.6 percent higher in the fourth quarter compared with the third, and were down 0.3 percent from a year earlier. Photographer: Simon Dawson/Bloomberg

U.K. house prices rose for a second month in December and will probably remain little changed in 2013 as the uncertain economic outlook constrains property demand, according to Halifax.

Values advanced 1.3 percent from the previous month to an average 163,845 pounds ($262,900), the mortgage unit of Lloyds Banking Group Plc said in a statement in London today. The monthly price gain in November was revised to 1.6 percent from a previous estimate of 1 percent. From a year earlier, values rose 2.6 percent in December.

While the British economy emerged from a recession in the third quarter and the Bank of England is trying to boost the availability of credit, uncertainty about the recovery is curtailing property demand. Nationwide Building Society said last week that house prices may decline “modestly” in 2013.

“During 2012, house prices were broadly flat and we expect this subdued trend to continue,” said Blerina Uruci, an economist at Barclays Plc in London. “However, we forecast a gradual recovery to emerge toward the second half supported by improving economic conditions, loose monetary policy and restricted supply. We also expect the BOE’s Funding for Lending Scheme to provide some support to prices, albeit modest.”

Prices were 0.6 percent higher in the fourth quarter compared with the third, and were down 0.3 percent from a year earlier, according to today’s report.

Funding Plan

The Bank of England said in a Jan. 3 report that lenders increased the availability of mortgages “significantly” in the fourth quarter and spreads on home loans declined as its FLS began to take effect. A separate report showed mortgage approvals rose to the highest in 10 months in November.

Halifax said today that housing activity has “picked up a little,” noting that sales in the three months through November were up 2 percent from the same period a year earlier.

“There was evidence of a firming in the housing market in the final few months of 2012,” said Martin Ellis, a Halifax economist. “We expect continuing broad stability in house prices nationally in 2013 with prices likely to end the year at levels close to where they begin.”

Britain’s economy is likely to return to growth this year, according to a Bloomberg News survey of economists last month. Still, services unexpectedly shrank for the first time in two years in December and a construction index fell to a six-month low, clouding the economic outlook.

The pound weakened for a third day against the dollar, slipping 0.1 percent to $1.6056 as of 10:11 a.m. London time. It dropped to $1.6010 on Jan. 4, the lowest since Dec. 7. Sterling traded at 81.22 pence per euro.

Cameron’s Priorities

U.K. Prime Minister David Cameron, setting new priorities for his coalition with the Liberal Democrats, put child care, the elderly and transport investment at the core of his agenda in the run-up to elections in 2015. The Conservative Party leader will hold a joint news conference today with Lib Dem Deputy Prime Minister Nick Clegg to highlight their shared agenda as they publish a “Mid-Term Review” summing up coalition achievements since 2010 and announcing new policies.

Cameron yesterday predicted a difficult year for the economy that will require maintaining the current mix of low interest rates and deficit reduction. The BOE will probably keep the size of its bond-purchase program unchanged and keep its key interest rate at a record-low 0.5 percent, according to two surveys of economists. The decision will be announced at noon on Jan. 10.

U.K. Outlook

U.K. businesses are more optimistic on the economic outlook this year as tensions related to the euro-region debt crisis ease, according to separate surveys of finance directors and manufacturing executives published today.

Chief financial officers at some of Britain’s biggest companies see a 40 percent chance of the economy falling back into recession, down from about 43 percent in the third quarter, Deloitte LLP said. The proportion of CFOs expecting one or more countries to exit the euro area this year also declined.

A separate report from the Engineering Employers Federation showed that the proportion of factory executives expecting an improvement in the U.K. economy in 2013 has increased.

In the euro area, the European Central Bank’s pledge last year to buy unlimited government bonds of countries signing up to reform plans has damped expectations of a break-up. The Sentix research institute said today that investor confidence increased for a fifth month in January. Its index of sentiment in the economy rose to minus 7 from minus 16.8 in December, the highest level since July 2011.

Another report showed producer-price inflation in the 17- nation euro region slowed to 2.1 percent in November from 2.6 percent in October.

Elsewhere in Europe, the Swiss central bank said its foreign-currency reserves dropped in December after pressure on the franc eased. Holdings declined to 427.2 billion francs ($460 billion) from a revised 427.4 billion francs in November, the Zurich-based Swiss National Bank said.

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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