U.K. November Housing Sales Decline to 30-Year Low

By Brian Swint

Dec. 9 (Bloomberg) -- U.K. home sales declined to the lowest level since at least 1978 as Britain plunged deeper into a recession, the Royal Institution of Chartered Surveyors said.

Real-estate agents and surveyors sold an average of 10.6 homes in the quarter through November, the least since the series began three decades ago, RICS said today. A separate report showed retail sales fell in two consecutive months for the first time since at least 1995.

The Bank of England last week reduced the benchmark interest rate to 2 percent, the lowest in a half-century, as policy makers sought to prevent deflation from taking hold in the economy. With homebuyers shunning the housing market and a squeeze on bank lending, central bank Governor Mervyn King has refused to rule out cutting the rate to zero.

“The problem is partly mortgage finance, but the other thing is the state of the economy,” Simon Rubinsohn, chief economist at RICS, said in an interview on Bloomberg Television. “Prices are continuing to fall fairly sharply.”

The percentage of real-estate agents saying prices dropped exceeded those reporting gains by 76 percentage points, an indicator that has been negative since August 2007, RICS said. The index still rose for a third month to the highest level since February.

Retail Sales

Prime Minister Gordon Brown this month reduced sales tax to bolster consumer spending as the housing slump deepened. U.K. retail sales at stores open at least 12 months dropped 2.6 percent in November from a year earlier, the British Retail Consortium said today. That’s the first back-to-back annual decline since the survey started 13 years ago.

“These are clearly tough times,” Stephen Robertson, director general at the BRC, said in a statement. “All sectors are down apart from food and drink.”

The pound has dropped 25 percent this year as the deteriorating economy prompted the central bank to reduce rates to the lowest since 1951. The currency traded at $1.4821 as of 8:08 a.m. in London.

Britain’s inflation rate fell the most in at least 11 years in October to 4.5 percent after oil prices dropped and the economy contracted 0.5 percent in the third quarter. Producer prices declined for a fourth month in November, the statistics office said yesterday.

U.K. mortgage approvals matched the lowest since at least 1999 in October as the financial crisis prompted banks to hoard money and curb loans, the Bank of England reported Dec. 1. The central bank predicted last month that the economy will contract through most of next year.

“Unless people feel relatively confident about their job prospects, they’re unlikely to even try to obtain mortgage finance,” said Jeremy Leaf, a spokesman for RICS and a real- estate agent. “Vendors still have to accept the inevitable fact that house prices are falling and re-price their property to suit current market conditions.”

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