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London leads the biggest UK house-price drop in years

London led the biggest drop in UK home values in at least five years this month as higher mortgage costs and the prospect of further declines in prices kept buyers away, a report by Rightmove Plc showed.

The average UK asking price fell 3.2 percent to £232,396 (US$473,437) from November, the largest decline since the survey of real-estate agents' listings began in 2002, Britain's most-used property Web site said yesterday. London home costs dropped 6.8 percent, also the most recorded by Rightmove.

"The market is tough out there," Miles Shipside, the company's commercial director, said in an interview. "We see a flat outlook for next year, with no price rises, as we work our way through this liquidity crisis."

The Bank of England this month cut the benchmark interest rate for the first time in two years, citing the threat of an economic slowdown. Confidence among British real-estate agents has slumped as pricier mortgages and the worst performance for property values since 1995 discourage homebuyers.

Prices in the London region fell an average of £8,099 on the month and all 32 areas of the capital in the survey had declines, led by the districts of Hackney, Tower Hamlets and Islington, Rightmove said. Home costs in Kensington and Chelsea, where Russian billionaire Roman Abramovich lives, fell 4.9 percent to £1.65 million.

"The market is obviously on the turn," said Jonathan Slater, a chartered surveyor at Foster Slater in central London. "A lot of people are waiting to get through Christmas. There's a lot of bated breath and nobody quite knows what's next."

Home values declined in nine out of the 10 regions of England and Wales surveyed by Rightmove, with only the West Midlands gaining. After London, the biggest drop was in the southeast, where prices fell 3.8 percent.

UK real-estate agents and surveyors became the most pessimistic about house prices since at least 1998 last month, the Royal Institution of Chartered Surveyors said on Thursday. Mortgage lender HBOS Plc said Dec. 5 that home values fell for a third month in November, the worst streak in 12 years.

Britons, whose debt totals £1.4 trillion, face higher loan costs after contagion from the US subprime-mortgage collapse froze lending between banks. The average rate offered by lenders on a mortgage for 95 percent of the price of a property, fixed for 24 months, increased to 6.44 percent from 6.42 percent in October, the Bank of England said on Dec. 11.

The UK central bank joined the Federal Reserve and other counterparts around the world last week as they pledged to offer as much as US$64 billion to break a logjam in money markets.
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