U.K. House Prices Drop the Most in 16 Months

, Hometrack Says
By Craig Stirling - Aug 30, 2010 7:01 AM GMT+0800
http://www.bloomberg.com/news/2010-08-29/u-k-house-prices-fall-most-in-16-months-as-market-hits-repricing-phase.html

The average cost of a home fell 0.3 percent from the previous month to 158,200 pounds ($246,000), the London-based property researcher said in an e-mailed statement today. Photographer: Colin McPherson/Bloomberg

U.K. home values dropped in August by the most in 16 months as the housing market endured a “modest re-pricing” that is likely to last as long as a year, Hometrack Ltd. said.

The average cost of a home fell 0.3 percent from the previous month to 158,200 pounds ($246,000), the London-based property researcher said in an e-mailed statement today. That was the biggest drop since April 2009. Hometrack’s index is based on a survey of 5,100 real-estate agents and surveyors.

The report adds to mounting evidence that the housing market is weakening, and economists predict data tomorrow may show that banks granted the fewest mortgages in more than a year last month. Britain’s economy “remains fragile” and officials may need to expand their emergency stimulus to aid the recovery, Bank of England Deputy Governor Charles Bean said on Aug. 28.

“The housing market is in the process of a modest re- pricing that is likely to run for the next six to 12 months,” Richard Donnell, Hometrack’s director of research, said in the statement. There is also “growing weakness on the demand side, a weakness which represents more than just a seasonal blip.”

From a year earlier, prices rose 1.5 percent, the least in five months, Hometrack said. Demand for homes, measured by the change in new buyers registering with real-estate agents, fell for a second month, dropping by 2.2 percent.

The supply of homes “has improved markedly and this has reduced the support for house prices provided by the scarcity of housing for sale over 2009 and early 2010,” Donnell said. Prices fell in every region apart from Wales, where they were unchanged, the report showed.

“The deleveraging process is incomplete, the recovery remains fragile and a considerable margin of spare capacity is yet to be worked off,” Bean said at a conference in Jackson Hole, Wyoming. “Further policy action may yet be necessary.”

U.K. banks probably approved 46,500 mortgages in July, the least in 14 months, according to the median forecast of 19 economists in a Bloomberg News survey. The Bank of England will release that data tomorrow.

To contact the reporter on this story: Craig Stirling in London at cstirling1@bloomberg.net