British House Prices Fall In January

Source : The Business Times, January 22, 2008

UK house prices declined for a third month in January, reviving interest among prospective buyers after a slump in viewings late last year, Rightmove plc said.

The average asking price fell 0.8 per cent to £230,428 ($647,908) from December, compared with a 3.2 per cent drop the previous month, Britain's most-used property website said yesterday. While the annual price gain slowed to 3.4 per cent, the lowest since 2005, the average time for a house on the market declined and Internet traffic on Rightmove's site picked up.

'Enough sellers seem to have dropped their prices to encourage potential buyers to look in larger numbers, suggesting we might see a more active market at this lower price level,' said Miles Shipside, commercial director of Rightmove, in a statement.

'Now is a good time for bargain hunters to press those committed winter sellers for a deal.' The UK's decade-long property boom withered in October as higher borrowing costs and forecasts for slowing economic growth deterred buyers. The Bank of England cut its benchmark interest rate for the first time in two years in December and economists predict another reduction next month.

The average time on the market for a property fell to 95 days in January from a record 98 days in December. Realtors reported greater interest from buyers and Rightmove's website received 20 per cent more visitors in the first two weeks of 2008 than in the same period a year ago, yesterday's report showed.

'The first signs of recovery are there,' Bob Jones, a real estate agent at Intercounty in Bishop's Stortford, a town in Hertfordshire close to Stansted Airport, said in an interview. 'People are beginning to look again now, whereas in the three months up to Christmas viewings had dried up.'

In London, prices rose 3.6 per cent to an average £398,476 after a 6.8 per cent drop the previous month. Asking prices advanced in all but two of 32 boroughs, while time on the market reached a record 94 days this month, Rightmove said.

'While we expect the London market to be more buoyant than the rest of the country in 2008, it remains to be seen if these higher asking prices can be achieved on top of last year's rises,' the report said.

December was the worst month for the housing market since the aftermath of Britain's last recession in 1992, the Royal Institution of Chartered Surveyors said recently. HBOS plc, the country's largest mortgage lender, said that prices dropped in Q4, the first three-month decline since 2000.

British consumers, with total debt of £1.4 trillion, are struggling with higher loan costs after contagion from the United States sub-prime-mortgage collapse froze lending between banks. The average rate offered by lenders on a mortgage for 95 per cent of the price of a property, fixed for 24 months, rose to 6.53 per cent in December from 6.44 per cent, the Bank of England said recently.

The decline in property values has contributed to a drop in consumer spending. Retail sales unexpectedly fell 0.4 per cent in December, the most in 11 months, the statistics office said on Jan 18.

The economy is still creating jobs after the fastest expansion in three years in 2007. Unemployment fell to the lowest since 1975 in December and jobs growth in the quarter through November was the strongest in a decade. 'Affordability should continue to improve as average wages rise and interest rates fall,' Rightmove said yesterday. It predicts that average house prices will be unchanged this year after almost tripling in the past decade. -- Bloomberg