LONDON (Reuters) - British house prices, at least those outside London, won’t rise for at least another year as unemployment stays high and bank lending conditions remain restrictive, a Reuters poll forecast on Tuesday.
Average home prices, which fell a fifth in just two years from their peak in 2007, will slip a little over 1 percent this year and stagnate in 2013, according to the consensus from a regular survey of 25 market watchers, taken over the past week.
However prices in the capital, one of the world’s busiest financial centers where demand nearly always tends to outstrip supply, are expected to rise 3.0 percent this year and 2.0 percent next, medians from a smaller sample suggested.
With the economy officially in recession, unemployment at 8.1 percent, not far below a 17-year high, and banks imposing tough criteria before lending money, the housing market is struggling.
“Everything will hold prices back,” said Michael Saunders at Citi. “It’s unemployment, credit availability, affordability - everything.”
During a 10-year boom to 2007, average house prices in Britain tripled. But that bubble has partially burst, knocking what has long been a bedrock of consumer wealth.
After hitting a trough in early 2009 during the worst of the financial crisis, average house prices rebounded. But they are now back in a mild downdraft, leaving them down a little more than 10 percent from the top.
A comfortable majority in the poll, 14 of 23 participants, said British house prices have further to fall, with the most pessimistic respondent predicting a 40 percent plunge from here.
Hit hard by a global slowdown and the euro zone crisis, the economy is expected to escape from recession this quarter but it will only grow moderately over the coming year and unemployment may yet climb higher, a separate Reuters poll showed.
In August, the average price of a home was 164,729 pounds ($268,000), according to mortgage lender Nationwide, around six times last year’s average British salary of 26,200 pounds and out of reach of many buyers.
In the United States, the average existing home price was $187,300 in July after falling by around a third over five years. Unlike in Britain, house prices there are seen making modest gains this year and next. <US/HOMES>
The poll suggested British house prices were still overvalued in comparison with economic fundamentals, assigning them a consensus rating of “6” on a 10-point scale where “1” is very undervalued, and “10” extremely overvalued.
Mortgage approvals, used as a guide to future housing market activity, are only seen creeping up from current levels of around 47,000 per month.
The poll showed them at 50,000 in six months’ time and 55,000 in a year - around half their average level in 2007.
But those able to gain finance have benefited from the Bank of England holding interest rates at just 0.5 percent for more than three years. It is not expected to move them until 2014 at the earliest as it struggles to kick-start growth. <BOE/INT>
British housebuilder Persimmon PSN.L, which has focused on building where house prices have stayed strong, posted a 65 percent rise in first-half profit last month. It said the low level of mortgage availability would constrain demand for homes.
But Barratt Developments BDEV.L, Britain’s biggest housebuilder by volume, said last week that the UK housing market remained stable, despite the recession, and that its businesses in London continued to perform especially well.
“If the UK economy is starting to get back on its feet then the supply issue, the demand story and employment issue are going to make London the outperformer,” said James Knightley at ING Financial Markets.
Overseas investment in top-end London real estate has traditionally come from Middle Eastern oil wealth and U.S. bankers. But over 100 nationalities are now parking money in top London property, according to property agent Savills SVS.L.
For those with money to burn Britain’s most expensive home, located between Harrods department store and the Royal Albert Hall, recently went on the market with a reported sale price of 300 million pounds - enough to buy 1,821 average UK properties.
Polling by Somya Gupta; Editing by Susan Fenton