UK house prices fall again as supply climbs

Third decline in a row in May as prospect of higher taxes and end of some disclosure rules rattle homeowners

HOUSE prices in the UK fell in May for a third month as the prospect of higher taxes and the end of some disclosure rules prompted more homeowners to put up their properties for sale, Acadametrics Ltd says.

The average cost of a home in England and Wales fell 0.2 per cent to £220,352 (S$453,823) from April, the research group said in an estimate released by e-mail yesterday. Previously reported house-price gains for March and April were revised to declines as more transaction data became available.

Britain's housing market rebound has shown signs of slowing this year as consumers brace for the spending squeeze and tax increases due in the emergency June 22 budget from Prime Minister David Cameron's coalition government.

While mortgage approvals rose to a four-month high in April, they remain at less than half the total at the housing boom peak in 2007.

The property market 'is delicately poised and easily buffeted in one direction or another by slight changes in circumstances', Acadametrics chairman Peter Williams said in the report. 'The question now is: Will that decline continue through to the end of the year and beyond? There is much to suggest that it will.'

Values in London dipped 0.1 per cent to £374,758 in April, the month with the latest available regional data, while values in England's East Midlands region dropped 2 per cent, Acadametrics said.

Annual UK price gains slowed to 9.7 per cent, the least in four months.

Mr Cameron, who took office last month, intends to tax capital gains on non-business assets, including property, in line with income tax, according to the May 11 coalition agreement. Capital gains are now taxed at 18 per cent, with income tax ranging from 20 per cent for most people to 50 per cent for the highest earners. The government has also halted the requirement for sellers to provide buyers with Home Information Packs.

'Market conditions in May were obviously influenced by the suspension of Home Information Packs on May 20 and by government announcements on increased capital gains tax on property,' Mr Williams said. 'Together, these propelled more homes onto the market and thus adjusted the demand/supply balance.'

Values are now 5 per cent below the February 2008 peak on Acadametrics' gauge. Transactions in May declined 18 per cent from April to the lowest for the month in 15 years, the research group said.

Acadametrics uses methodology employed by the US S&P/Case-Shiller price index, combining initial housing transaction data from the UK Land Registry and results from other price measures to produce an estimate for the most recent month. That number is then updated in following months as more sales are reported. -- Bloomberg

Source: Business Times, 12 Jun 2010