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Tuesday, August 19, 2008 2:28 AM


UK Housing Market At Standstill


Bloomberg is reporting U.K. House Prices Decline Most Since at Least 2002

U.K. house prices posted the biggest annual decline since at least 2002 as banks choked off mortgage lending, deepening London's property slump, Rightmove Plc said.

The average asking price for a home fell 4.8 percent in August from a year earlier to 229,816 pounds ($426,929), the biggest yearly drop since Rightmove began measuring home values six years ago. Britain's most-used property Web site also said today that prices dropped 2.3 percent on the month, the most since December, led by London.

Market `Standstill'

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.
Demand For Rental Homes Soar

Amidst faltering sales, Demand for U.K. Rental Homes Gains at Fastest Pace in a Decade.
Demand for rental homes in the U.K. climbed in the second quarter at the fastest pace in at least a decade as a slump in property prices deterred homebuyers, a report by the Royal Institution of Chartered Surveyors showed.

During the quarter, 37 percent more real-estate brokers reported an increase in new rental contracts than those that said there was a drop, the London-based industry group said. RICS members also reported the largest increase in mandates to rent out properties since the survey was first carried out 10 years ago.

Many homeowners are "opting to rent their property while sales in the housing market continue to dry up," said James Scott-Lee, a spokesman for RICS, in a statement. "Established investors have been reaping the benefits of the housing downturn for sometime."

On Aug. 5, Chancellor of the Exchequer Alistair Darling left open the possibility of a temporary suspension of a tax on house sales to revive the property market. A poll of 1,350 members of the National Association of Estate Agents last week showed that a quarter reported that a sale had fallen through as vendors waited for the tax break to be implemented.

Increased demand for rented homes has helped lift rents and caused the proportion of landlords planning to sell their property to fall to the lowest level since 2003, the RICS survey showed.

The growing supply of rental properties may limit rent increases in the future, the Surveyors said.
Industrial Property Values Decline

Brixton Reports First-Half Loss as Property Values Decline
Brixton Plc, the U.K.'s largest owner of industrial buildings, reported a loss for the first half as the company's properties depreciated.

The net loss was 235 million pounds ($437 million), or 86.8 pence a share, compared with a profit of 192 million pounds, or 70.9 pence, a year earlier, the London-based company said today in a statement. Net asset value, excluding derivatives and deferred tax on value gains, fell 18 percent to 448 pence a share.
The UK is facing price declines in both residential and commercial, as is the US. Expect this trend to continue for quite some time, with perhaps a temporary blip up if Chancellor of the Exchequer Alistair Darling suspends the tax on house sales to revive the property market.

I have a hint for Chancellor Darling: The cure for this mess is lower prices, not government "prop jobs".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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