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UK house prices fall in July

Prices fall as mortgage lender Halifax sees stagnant market

Image Credit: Bloomberg
New homes for sale at Gin Pit Village, a residential housing development, in Tyldesley. From a year earlier, UK house prices were down 1.3 per cent in July, according to an index by Halifax, a mortgage lender.
Gulf News

London: UK house prices fell in July for the first time in three months, according to mortgage lender Halifax, adding to signs of weakness in the property market.

Values dropped 0.6 per cent from the previous month, when they rose 0.8 per cent, the mortgage unit of Lloyds Banking Group Plc said in a statement in London on Monday. In the quarter through July, values were unchanged compared with the previous three months, and now average £161,094 ($251,500, Dh923,533).

Policy makers are struggling to boost lending and kick-start a recovery after Britain’s recession deepened in the second quarter. The Bank of England will probably lower its outlook for the economy when Governor Mervyn King presents new quarterly economic forecasts on August 8, a week after officials started a Funding for Lending plan to increase credit supply.

“The Halifax data heighten our suspicion that house prices are headed lower over the rest of 2012,” Howard Archer, economist at IHS Global Insight in London, said in a research note. “There is a significant and mounting danger that house prices could fall further and longer due to the serious downside risks to the UK economic outlook, both from domestic factors and from the euro-zone crisis.”

From a year earlier, UK house prices were down 1.3 per cent in July, according to the Halifax index. Rightmove Plc, the operator of the UK’s biggest property website, said Monday that the housing market “continues to be blighted by low transaction levels,” and recent data support that view.

Weak Demand

Nationwide Building Society reported a 0.7 per cent decline in prices last month, and Hometrack Plc said values fell 0.1 per cent as demand dropped the most in six months. Bank of England data show mortgage approvals fell in June to the lowest since December 2010.

“House prices have been very stable over the past year or so,” said Martin Ellis, housing economist at Halifax. “We expect little change in prices over the remainder of 2012 so long as the economic climate in the UK does not worsen substantially.”

Britain’s economy shrank 0.7 per cent in the second quarter, the most in more than three years. All 16 economists in a Bloomberg News survey say the central bank will lower its 2012 economic outlook this week, while all but one see a reduction in the 2013 projections. A majority also forecast a cut to the central bank’s 2012 and 2013 inflation projections.

BOE Forecasts

The Bank of England, which kept its bond-purchase target at £375 billion ($584 billion) last week, last published projections in May, when it forecast average annual growth of about 1.2 per cent in the fourth quarter of 2012 and 2.3 per cent in the fourth quarter of 2013. It predicted inflation at 2.9 per cent and 1.7 per cent in those quarters. Consumer-price growth slowed to 2.4 per cent in June.

UK manufacturing production probably fell 4.3 per cent in June from the previous month, economists said in a survey before a report due tomorrow. Industrial output probably declined 3.5 per cent. Also in the UK this week, a report on August 10 may show factory output prices were unchanged in July after dropping 0.4 per cent the previous month.

The pound declined to a four-week low against the euro Monday. It weakened 0.3 per cent to 79.43 pence per euro after falling to 79.46 pence, the weakest since July 9. It fell 0.4 per cent versus the dollar to $1.5583.

Asian Growth

Elsewhere Monday, Indonesia’s economic growth unexpectedly accelerated as rising investments countered declining exports. Gross domestic product rose 6.37 per cent in the three months ended June 30 from a year earlier, compared with a revised 6.32 per cent gain for the first quarter, the Central Bureau of Statistics said in Jakarta.

Separate reports showed consumer prices in Taiwan rose at the fastest pace in more than three years in July. In Australia, job notices declined for a fourth month in July.

In the UK, the British Chambers of Commerce said 52 per cent of companies it surveyed cited economic developments in the euro area as the main issue that will affect their businesses this year and next. Forty-six per cent cited UK government spending cuts, while 42 per cent access to finance.

Investor confidence in the euro area fell less than economists forecast in August after the European Central Bank said it may take new measures to tame the region’s debt crisis. An index of sentiment by Germany’s Sentix institute declined to minus 30.3 from minus 29.6 in July. Economists forecast a decline to minus 31, the median of seven estimates in a Bloomberg survey shows. A gauge of expectations rose to minus 23.3 from minus 24.

Italian Prime Minister Mario Monti warned of a potential breakup of Europe without greater urgency in efforts to lower government borrowing costs. In an interview with Der Spiegel magazine published Sunday, he said disagreements within the 17-nation euro area are detracting from the response to the debt crisis and undermining the future of the European Union.

“The tensions that have accompanied the euro zone in the past years are already showing signs of a psychological dissolution of Europe,” Monti said.

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