London Led U.K. House-Price Declines in 2008, Hometrack Says
London house prices fell more than in any other U.K. region this year and probably will decline further in 2009 as the economy sinks deeper into a recession, Hometrack Ltd. said.
Residential property prices dropped 10.1 percent in the capital, more than the 8.7 percent average across the country, the property researcher said in a report today. London house prices fell 1 percent in December alone, compared with a 0.9 percent drop across Britain.
“The onset of recession and the prospect of rising unemployment over 2009 will continue to damp confidence and in turn demand, which will inevitably lead to further house price falls over the next 12 months,” Richard Donnell, Hometrack’s director of research, said in the statement.
Banks are rationing credit as they rebuild their balance sheets and brace for the recession, hurting the ability of consumers to afford moving. Prime Minister Gordon Brown’s government will announce new measures next month to revive lending after institutions failed to pass on the full impact of Bank of England interest-rate reductions.
Hometrack, which surveyed 1,809 real estate agents and surveyors, said many homeowners are choosing not to move as unemployment rises and companies including Woolworths Group Plc and MFI Group Ltd payday loans. tip into bankruptcy. Consumer spending shrank in the third quarter, triggering the biggest contraction in economic growth since 1990.
Interest Rates
Bank of England policy makers have indicated they may cut the benchmark rate further after trimming it to the lowest level since 1951. The key rate, now at 2 percent, has declined by 3.75 percentage points in the past year.
House prices in London fell more sharply than the 9.5 decline in East Anglia and 9.2 percent in the southeast, the report showed.
Hometrack expects prices to fall a further 10 percent next year and 3 percent more in 2010, the researcher said on Dec. 22. Rightmove Plc and the Royal Institution of Chartered Surveyors have also forecast a 10 percent decline for 2009.
The number of home sales fell 45 percent this year and will probably drop another 12 percent in 2009, the Hometrack report said. On average, homeowners will move once every 31 years in 2009, double the rate during the last decade.
Home-loan approvals plunged 61 percent to 17,773 in November from a year earlier, the British Bankers’ Association last week.
Filed under: business by Specialist