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

By Jennifer Ryan

Feb. 10 (Bloomberg) -- U.K. housing sales dropped to the lowest level since at least 1978 in the quarter through January as property prices fell further and Britain’s recession deepened, the Royal Institution of Chartered Surveyors said.

The average number of transactions in a survey of real- estate agents and surveyors dropped to 9.9 per respondent, the lowest since the data began three decades ago, the group said today in London. A separate report showed the slowest total retail sales annual increase since 1995 in January.

The Bank of England may start buying company debt this week in a bid to get credit flowing through the economy after policy makers cut the benchmark interest rate last week to 1 percent, the lowest ever. House prices may fall “significantly further,” the Financial Services Authority said yesterday.

“This will get worse before they get better,” said Dean Lomas, of real-estate agents John Earle & Son in Warwickshire, the West Midlands, the worst-performing region in the survey. “The current economic climate is affecting everything and will continue until we get some stability.”

The number of agents saying prices fell in January exceeded those reporting gains by 76.3 percentage points, compared with 73.9 percentage points in December, RICS said. The measure was minus 91 in the West Midlands, and minus 74 in London.

Enquiries to real-estate agents by new buyers still rose for a third month, led by Wales, the East and West Midlands and London, RICS said.

Overseas Buyers

“The majority of serious enquiries are coming from overseas cash buyers,” Kevin Ryan, an agent at Carter, Jonas LLP in London’s Westminster district, said in the report, adding that it was due to a drop in the value of the pound.

Wolseley Plc, the world’s biggest distributor of plumbing gear, said Jan. 26 pretax profit fell 66 percent in the first five months of its financial year after customers delayed refurbishments and British housing starts dropped to their lowest since 1945.

“People are extremely nervous about their jobs and the way prices are going,” said Jeremy Leaf, a spokesman for RICS. “It’s very fragile. There aren’t too many buyers around.”

The number of homeowners in so-called negative equity, meaning the size of their mortgage surpasses the value of their property, will exceed 2 million if prices drop 30 percent from 2007 levels, the FSA said in a report yesterday.

Prices “could fall significantly further,” the FSA said. “The actual path may be significantly influenced by the success of policy measures.”

Company Debt

The Treasury has given policy makers a 50 billion-pound ($74.8 billion) fund to spend on company debt to help ease monetary conditions now that interest rates are close to zero.

The government is also seeking to restore confidence in the 400 billion-euro ($523 billion) market for mortgage bonds by backing top-rated home-loan securities. Banks granted just 31,000 loans for house purchase in December, close to the lowest level since at least 1999.

The British Retail Consortium said same-store retail sales rose 1.1 percent last month from a year earlier, the best performance since May. It was still the lowest increase for January, a traditional month for discounts, since 2006. Overall sales rose an annual 2.6 percent, the least in 14 years.

William Morrison Supermarkets Plc, the smallest of the four main U.K. food retailers, reported faster holiday sales growth than its larger competitors on Jan. 22 as price cuts and Christmas advertising drew 2.2 million extra shoppers.

The economy contracted 1.5 percent in the fourth quarter, the most since 1980. Bank of England Governor Mervyn King will publish new growth and inflation forecasts tomorrow.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net