U.K. Housing Market `on Its Knees' Amid Crisis, Rightmove Says

By Brian Swint

Sept. 22 (Bloomberg) -- U.K. house prices fell for a fourth month in September as the global credit crisis intensified, locking out homebuyers and forcing the sale of the country's biggest mortgage lender, a report by Rightmove Plc showed.

``The housing market is on its knees and will remain so until financial institutions address the disastrous state of the mortgage funding markets,'' said Miles Shipside, commercial director at Rightmove. ``While this market provides a good opportunity to trade up, it requires a degree of bravery.''

The average asking price for a home fell 1 percent from August to 227,438 pounds ($414,000), Britain's most-used property Web site said today. From a year earlier, prices fell 3.3 percent.

The property market may face further weakness in coming months, provoking a ``painful'' adjustment for many families, Bank of England Chief Economist Spencer Dale said last week. HBOS Plc agreed to a takeover by Lloyds TSB Group Plc after plunging home values and the financial market crisis destroyed the value of the company and added to the threat of a recession.

Prices dropped the most in the East Midlands, where they fell 5.3 percent in the month, and values declined 3.9 percent in the southwest, Rightmove said. In London, house prices rose 4 percent in the month after a 5.3 percent drop in August.

The U.K. economy entered a recession in July, forecasts by the Confederation of British Industry, the country's largest business lobby, show. Growth stalled in the second quarter, ending the longest period of uninterrupted economic expansion in more than a century.

Tax Change

Prime Minister Gordon Brown suspended the tax on home purchases of less than 175,000 pounds this month. Still, the number of new listings per estate agent fell to a record low, Rightmove said.

``The changes in stamp duty are just tinkering at the edge of the system,'' Shipside said. ``At best they will give slightly more choice to first-time buyers.''

Other housing data also show the housing slump has deepened. Home sales plunged to a 30-year record low in August, the Royal Institution of Chartered Surveyors said Sept. 9. Prices fell by the most in a quarter century, HBOS said Sept. 4.

Bank of England policy makers said they are still concerned the fastest inflation in a decade will become embedded in the economy, making them more reluctant to lower interest rates, minutes of this month's meeting showed. They voted 8-1 to keep the rate at 5 percent, with David Blanchflower voting for the biggest reduction since the Sept. 11 attacks and Timothy Besley abandoning a push for higher rates.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.