U.K. Home Sales Fall to Lowest Since at Least 1978, RICS Says

By Svenja O'Donnell

Oct. 14 (Bloomberg) -- U.K. home sales fell in September to the lowest level in at least three decades, led by London, as the financial crisis prompted price drops across the nation, the Royal Institution of Chartered Surveyors said.

Estate agents and surveyors sold an average of 11.5 homes last month, the lowest level recorded since the series began in 1978, RICS said in an e-mailed report today. In London, the figure was 8.3. The number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 84, compared with 82 in August.

The global crisis sapped confidence among investors and consumers, pushed mortgage lending to the lowest since at least 1999 and provoked the worst weekly drop for the U.K. FTSE 100 benchmark stock index since 1987. Bank of England policy maker Andrew Sentance said yesterday that the economy may already be in a recession.

``London continues to occupy bottom place in the activity league'' for home sales, the report said. ``Further price falls in the near term are likely.''

Prices declined further in London, Wales, the North, the North West and the East Midlands, and the price balance fell to the lowest on record in Scotland, RICS said.

Prime Minister Gordon Brown said yesterday that the government will take stakes in Royal Bank of Scotland Group Plc and other banks in exchange for 37 billion pounds ($64 billion) in cash. Financial firms have reported $635 billion in losses and writedowns from U.S. mortgage-related investments since the beginning of last year.

Stock Slump

Those losses froze credit markets and prompted fears of a recession which helped push the FTSE 100 down 21 percent last week as global stock markets slid.

The Bank of England cut the benchmark interest rate by half a point to 4.5 percent on Oct. 8, a day before its scheduled monetary policy decision, the biggest reduction in seven years. It joined other banks including the European Central bank and the U.S. Federal Reserve.

``As expected, the financial crises have had a dire effect on the property market this month,'' said Kim Turner, a real- estate agent at Bective Leslie Marsh in London's exclusive Kensington district. ``Buyers are incredibly wary of the market and prices.''

Consumers have pared spending as weakening house prices and the slowing economy squeezes incomes. Sales in U.K. shops open at least a year fell an annual 1.5 percent in September, the British Retail Consortium, which represents 80 percent of stores, said in a separate report today. Clothing, footwear, furniture and household goods led the drop.

Economic growth stalled in the second quarter, ending the longest stretch of uninterrupted expansion in a century. The International Monetary Fund predicts the U.K. economy will contract 0.1 percent next year after forecasting growth of 1.6 percent six months ago.

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.