U.K house prices fall for fourth month in a row
U.K. house prices have declined for a fourth month in January as higher interest rates have halted buyer's confidence, reports Hometrack.


The average cost of a home in England and Wales has fallen by 0.3 percent, the same rate drop as in December, to 174,700 pounds, the London-based research group stated yesterday. The average selling time has risen to 8.5 weeks, the most ever since the survey of real-estate agents and surveyors began in 2001.


"Weak confidence among would-be purchasers continues to put downward pressure on house prices,'' said Richard Donnell, director of research at Hometrack. "With most buyers also being sellers, households are now waiting until there are signs of general stability before committing.''


Economists predict that the Bank of England will decrease the benchmark interest rate further on Feb. 7 after cutting it from a six-year high last month.


"Alongside data showing weakness in activity, the bank has flashing on its radar inflation risks that look to be pronounced and enduring,'' said David Tinsley, an economist at National Australia Bank in London who formerly worked at the Bank of England. "Rates will get to 4.75 percent this year, and then the bank will stay on hold.''


House prices increased 2.3 percent from the previous year, the least since June 2006, states Hometrack. The supply of homes for sale has declined 4.6 percent in a month as people are unsure about the financial gains in buying property at this time.


House prices may decline about 5% this year and about 8% in 2009, Roger Bootle, economic adviser at Deloitte & Touche, explains. U.K. home prices probably won't pick up until mid-2009, according to Instant Access Group, the country's biggest property investment club.


Growth Outlook
The weaker residential property market is set to be the worst U.K. economic performance since 15 years ago, when Britain last emerged from recession, Bootle said. He predicted the economy, which grew 3.1% in 2007, may expand 2% this year and even less in 2009.


"Not only is the interest-rate environment far less favourable, but the global financial crisis and the associated credit crunch have brought an end to the period of easy credit that in recent years has been the bedrock of the rapid rises in house prices,'' Bootle said.