UK house prices drop for third month in a row on weakening demand

Research group Hometrack sees demand weakening amid an uncertain economic outlook

PUBLISHED : Wednesday, 03 October, 2012, 12:00am
UPDATED : Wednesday, 03 October, 2012, 5:00am

House prices in Britain fell for a third month in a row last month on weakening demand that may continue to weigh on property values, Hometrack said.

Prices declined 0.1 per cent from August and 0.5 per cent from a year earlier, the London-based property research group said. The number of new buyers registering with real-estate agents fell 3.6 per cent, the biggest drop in eight months.

"The uncertain economic outlook, together with affordability pressures, will continue to act as a drag on housing-market activity," said Richard Donnell, Hometrack's director of research. "Pricing will remain under slow downward pressure, but a tightening of supply will limit the scale of price falls in the short term."

Donnell said that pressure on home values may outweigh the effects of a boost to mortgage lending provided by the Bank of England's new credit-boosting programme. The central bank's policymakers will probably commit to completing their plan to raise bond holdings to £375 billion (HK$4.7 trillion) as they assess the impact of their initiatives to aid economic growth.

Prices did not rise in any region of England and Wales. Values were unchanged in London and the southwest of England, and declined everywhere else.

Prices fell "on the back of weakening demand, a fall in sales agreed and a repricing of unsold stock", Donnell said.

The Bank of England said last week that mortgage availability increased the most in five years in the latest quarter as wholesale funding markets eased. It said that its new £61 billion Funding for Lending Scheme was set to spur a further expansion.

Banks probably granted 49,200 loans to buy homes in August, the most in three months.

Nationwide Building Society's housing index showed prices fell 0.4 per cent last month following a downwardly revised 1.1 per cent bounce in August. The customer-owned lender's gauge of values tends to be more volatile than that of Hometrack.

The Bank of England is expected to announce the outcome of its monthly policy decision tomorrow. Policymakers would commit to completing their bond-buying programme, said all 40 economists in a Bloomberg News survey. They were also expected to hold the benchmark interest rate at a record low 0.5 per cent, a separate poll showed.

A survey released on Monday by Lloyds Bank showed more UK companies were optimistic than pessimistic about the economic outlook for a second month. The index of sentiment held at 10 last month. The bank surveyed 300 companies with sales exceeding £1 million from September 3 to 14.

Additional reporting by Reuters