UK home price gains seen stalling

Supply will increase next year due to forced sales, says property firm

The UK housing market recovery will peter out in 2010 as the supply of homes increases because of forced sales, Rightmove plc said.

Average asking prices will stagnate next year after rising about 2 per cent in 2009, the operator of the UK’s biggest property website said in a statement yesterday. Prices fell 2.2 per cent this month to an average of £221,463 (S$501,207), and may drop again next month, the group said.

Banks may show ‘less forbearance’ to consumers who are late on mortgage payments after the general election, which Prime Minister Gordon Brown must call by June 2010, Rightmove said. A shortage of properties available helped stoke prices this year and erased some losses in values caused during the slump.

‘2009 turned out to be a good time to trade up,’ Miles Shipside, commercial director of Rightmove, said in the statement. ‘We forecast the positive mood will continue into 2010 until the post-election hangover kicks in.’

The pound fell 0.1 per cent against the US dollar yesterday morning to US$1.6223 in London. The two-year gilt was two basis points lower at 1.19 per cent.

Asking prices fell 5.8 per cent from November in the North of England, making it the worst-performing of 10 regions tracked by Rightmove. East Anglia, where prices rose 0.5 per cent on the month, was the only area to show a monthly increase. Rightmove measured asking prices from listings on its site from Nov 8 to Dec 5.

Prices in London fell 1.2 per cent, led by a 6.2 per cent drop in Hounslow. The next biggest drop was in Kensington and Chelsea, the capital’s most expensive district, where prices declined 5 per cent, or almost £100,000 in a month.

The average number of properties available for sale per real estate agent fell to 67, the lowest since February 2008, from 69 the previous month, Rightmove said.

The Council of Mortgage Lenders cut its forecast for UK mortgage repossessions this year after low interest rates helped Britons manage their payments. The CML last month forecast 48,000 repossessions, down from an earlier prediction of 75,000.

Repossessions may increase from the second half of 2010 because banks may become less patient with as many as 240,000 homeowners who have been late on mortgage payments and if interest rates increase, Rightmove said.

Record-low interest rates have made borrowing more affordable and helped more UK households meet debt payments, the Bank of England said yesterday, citing a survey it conducted with NMG Financial Services Consulting from September to October.

Still, Mr Shipside said a jump in mortgage lending next year isn’t likely.

‘We have seen recovery to a degree in mortgage lending, which is fairly a snail’s pace, and they are being particularly choosy,’ Mr Shipside said in an interview on Bloomberg Television.

‘I can’t see that changing particularly next year; it may even tighten up after the election.’

Source: Business Times, 15 Dec 2009