First fall in UK house prices in 15 months

Further decline seen as govt budget cuts bite, more putting homes on sale

(LONDON) UK house prices fell this month for the first time in 15 months as the government's budget squeeze curbed demand and more people tried to sell their properties, Hometrack Ltd said.

The average price in England and Wales fell 0.1 per cent from June to £158,700 (S$335,167), the London-based property researcher said in an e-mailed report yesterday, citing a survey of surveyors and real-estate agents. Home values in the capital led the decline, dropping 0.2 per cent. On the year, prices rose 2 per cent.

'The fall in prices marks a turning point for the housing market,' Richard Donnell, director of research at Hometrack, said in the report. 'Further modest price falls are inevitable over the second half of the year as the volume of homes for sale continues to rise and demand remains weak on the back of concerns over the wider economic outlook and uncertainty over the impact of recently announced cuts in government spending.'

The number of Britons expecting house prices to rise in the next year has dropped in a 'significant shift' in sentiment, Rightmove plc said in a separate report yesterday. The property market's outlook has dimmed as the nation braces for the deepest spending cuts since World War II and policy makers fret that threats to economic growth have increased.

An increase in the number of homes for sale is also depressing prices, with the amount of properties listed with estate agents rising 3.6 per cent this month, Hometrack said. In contrast, demand for homes has fallen, with the number of potential buyers registering with estate agents dropping 1.3 per cent, led by a 2.7 per cent decline in London.

'With falling demand and rising supply, there is a real possibility of sales volumes declining,' Mr Donnell said. 'With no immediate prospect of an upturn in demand, price levels are likely to remain under downward pressure in the coming months.'

Yesterday's report adds to evidence that the housing-market recovery is waning. Rightmove, owner of the UK's biggest property website, said last week that sellers cut prices for the first time this year and will probably keep doing so for the remainder of 2010, while Lloyds Banking Group plc's Halifax division said that house prices fell in June by the most in four months.

Confidence in future house prices has also fallen. The number of people expecting home values to be higher in a year fell to 41 per cent this month from 50 per cent in the previous quarter, Rightmove said yesterday. The company surveyed 22,010 people online between July 5 and July 19.

The drop 'is a significant shift', Miles Shipside, Rightmove's commercial director, said. 'With austerity measures starting to bite, a growing nervousness is to be expected.'

Bank of England policy makers considered adding to their emergency stimulus this month as they judged that the economy's growth prospects had 'probably deteriorated'.

Gross domestic product rose 1.1 per cent in the three months through June, almost twice as fast as the 0.6 per cent gain in a Bloomberg News survey of 32 economists. -- Bloomberg

Source: Business Times, 27 Jul 2010