UK house prices fell for a sixth straight month this month and will extend their decline next year on “weak” demand and tighter mortgage-lending conditions, Hometrack Ltd said.
The average cost of a home fell 0.4 percent from last month and prices will drop a further 2 percent next year, the London-based property researcher said in an e-mailed report yesterday. A separate release showed the majority of UK retailers predict a decline in sales next year.
The Hometrack report also showed sellers had to wait the longest since April last year to shift their properties this month and it adds to forecasts for a weaker housing market next year. The Royal Institution of Chartered Surveyors said this month that prices in the fourth quarter of next year may be 2 percent lower than current levels, while Rightmove PLC sees sellers cutting asking prices by as much as 5 percent.
“We expect house prices to remain under downward pressure in the first half of 2011 on the back of weak demand,” Richard Donnell, Hometrack’s director of research, said in the report.
However, “a tightening in supply together with continued low levels of housing transactions will continue to act as something of a support to pricing levels,” he said.
Demand for homes, measured by the change in new buyers registering with real estate agents, fell 4.8 percent this month from last month, Hometrack said. That’s the biggest drop since January last year and the sixth consecutive monthly decline. The number of homes for sale fell 1.5 percent, the group said.
Sellers achieved on average 92.1 percent of the asking price during the month, the lowest percentage since August last year, while the time taken to sell increased to 10 weeks, Hometrack said.
This year, average values fell 1.6 percent, Hometrack said. The supply of homes for sale rose 24 percent, while demand fell 7 percent. The latter dropped 18 percent in the second half.
The housing market has weakened as banks tighten lending criteria, causing the level of home loans to drop below half of that seen at the peak of the property boom in 2007. UK banks approved the fewest mortgages last month since March last year when the economy was in the depths of the recession, the British Bankers’ Association said on Thursday.
Adding to uncertainty among prospective homebuyers, the government is implementing the biggest budget squeeze since World War II, which will lead to public-sector job losses and may slow the economic recovery.
Weaker household confidence is also likely to affect retail sales. The British Retail Consortium said yesterday that almost two-thirds of UK retailers expect business to worsen next year.
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