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

By Brian Swint

Nov. 11 (Bloomberg) -- U.K. home sales declined to the lowest level in at least three decades as the lending freeze pushed down prices for a 15th month, the Royal Institution of Chartered Surveyors said.

Real-estate agents and surveyors sold an average of 10.9 homes in the quarter through October, the least since the series began in 1978, RICS said today. The percentage of agents saying prices fell exceeded those reporting gains by 82 points, an indicator that has been negative since August 2007. A separate report showed retail sales dropped for the first time since 2005.

The Bank of England cut the benchmark interest rate to the lowest since 1955 last week to help the economy through the biggest slump since the early 1990s. The reduction prompted mortgage lenders to bow to pressure from Prime Minister Gordon Brown to lower borrowing costs for their customers.

``Last week's interest-rate cut should certainly help to support the market now that lenders have agreed to pass on the reduction,'' said Ian Perry, a spokesman for RICS. ``Even so, the general lack of mortgage finance remains a major blockage in the housing market for a large majority of would-be buyers.''

Prices extended declines in all 12 of the regions monitored by RICS, the report showed. The balance of agents reporting falling values to increases was minus 100 in the North and minus 90 in London, RICS said.

The weakening property market and rising unemployment are encouraging shoppers to spend less. Retail sales fell an annual 2.2 percent in October, the first drop since April 2005, the British Retail Consortium said today.

Bank Rescue

Brown last month took controlling stakes in HBOS Plc and Royal Bank of Scotland Group Plc in a 37-billion pound ($58 billion) rescue. Financial institutions worldwide have lost more than $680 billion in the crisis that flared up with Lehman Brothers Holdings Inc.'s biggest ever bankruptcy in September.

Lenders, faced with the need to increase capital on their balance sheets, are paring loans to households. U.K. mortgage approvals stayed close to a record low in September and consumer credit rose at the weakest pace since 1993, the central bank reported on Oct. 29.

``We remain of the view that there will not be a recovery in the U.K. housing market in the short term,'' said homebuilder Taylor Wimpey Plc today after reporting a 40 percent drop in orders.

No Confidence

The RICS report adds to signs that the housing market continues to deteriorate. HBOS said last week that prices fell an annual 15 percent last month, the most since the survey began in 1983. Taylor Wimpey said today the building industry is starting to price properties ``competitively,'' putting further pressure on values.

``A lack of confidence is very apparent,'' said Nick van Zeller, a surveyor at Knight Frank in Hampshire, England, in a statement. ``Mortgage lending is tough.''

The U.K.'s economy will probably be the worst performer among advanced industrialized countries next year, with the European Commission forecasting a contraction of 1 percent.

``The rate cut will mitigate the pain in the housing market,'' said Amit Kara, an economist at UBS AG in London. ``But it's not going to turn it around. Banks aren't going to be keen to lend against an asset that's losing value.''

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