LONDON - Bloomberg
Housing prices in the United Kingdom posted the biggest annual decline in August since at least 2002, as reduced mortgage lending deepened the property slump in London, Britain's most popular property Web site said in a statement yesterday.
The average asking price for a home fell 4.8 percent from a year earlier to 229,816 pounds ($426,929), according to Rightmove Plc. In the month, home values fell 2.3 percent, the most since December, led by decreases in London.
�The lack of mortgage finance is central to the problem,� Miled Shipside, commercial director of Rightmove, said in the statement. �London, in particular, appears to be having its own special summer sale, with over 21,000 pounds off in a month.�
Bank of England Governor Mervyn King said last week that the housing market faces �a significant adjustment� as banks ration loans for homebuyers. Falling prices may exacerbate the economic slowdown as the threat of a recession looms and unemployment rises the most in 16 years.
Prices in London fell 5.3 percent on the month and 3.8 percent from a year earlier. Each of the 32 districts in the capital showed a decline, and the biggest drop was in the southwest area of Wandsworth, where values fell 7.9 percent. Hackney, in east London, was the best performer, with a 0.6 percent decline.
The stock of unsold property per real estate agent rose for a seventh month to 78, from 77 in July. The number of transactions may reach the lowest since 1959, Rightmove said.
Banks have starved the market of loans after more than $500 billion in losses and writedowns worldwide from the U.S. mortgage market collapse. U.K. mortgage approvals fell to the lowest since at least 1999 in June, the Bank of England said July 29. The Royal Institution of Chartered Surveyors said last week that the housing market is at a �virtual standstill.�
King said on Aug. 13 that �there is a feeling of chill in the economic air� and that �the British economy is going through a difficult and painful adjustment� that �cannot be avoided.�
Weakness in the housing market may �amplify� the impact of the lending squeeze on household spending, the British Central Bank said last week. Retail sales probably fell for a second month in July, dropping 0.2 percent, according to the median forecast of 32 economists in a Bloomberg News survey. The government's statistics office will release that data Aug. 21.
Britain's gross domestic product will either stagnate or contract in the next two or three quarters, meaning the economy may fall into a recession, the British Chambers of Commerce said in forecasts released yesterday.
Confidence on business prospects fell to the lowest level in at least six years, according to a survey of more than 200 companies released by Lloyds TSB Group Plc yesterday. The index of sentiment on the next 12 months fell to 22 in July, the lowest since the survey began in 2002, from 32 in June.
The economy probably grew 0.1 percent in the second quarter, less than previously estimated and matching the slowest pace since the aftermath of the last recession in 1992, the median forecast of 34 economists surveyed by Bloomberg News shows. The statistics office will publish the figures on Aug. 22.
Britain's central bank kept its benchmark interest rate at 5 percent on Aug. 7 for a fourth month, as policy makers weighed the risk of accelerating inflation against the threat of a recession. Minutes of their meeting, showing how the panel voted, will be released on Aug. 20.