U.K. House Asking Prices Drop for First Time in Five Months

By Brian Swint

June 22 (Bloomberg) -- U.K. home sellers lowered asking prices in June for the first time in five months as banks scaled back lending and required buyers to stump up bigger deposits, Rightmove Plc said.

The average cost of a home slipped 0.4 percent to 226,436 pounds ($372,000) from May, when it rose by 2.4 percent, the operator of the biggest U.K. residential property Web site said today. Separately, business service companies will lose more than 300,000 jobs within five years, the Centre for Economics and Business Research said in a report.

While the Bank of England says the housing market has shown signs of stabilizing, Governor Mervyn King cautioned last week that the squeeze on lending may slow the economy’s recovery from the worst recession in a generation. Unemployment, which rose to the highest since 1996 in the quarter through April, may also hamper a rebound in home values.

“We’re very much bumping along the bottom,” said Miles Shipside, commercial director at Rightmove, in an interview with Bloomberg Television. “Sellers are having to reduce prices to where they’re getting interest. With the pickup in sales activity, there’s a narrowing of the gap between asking prices and what’s actually being achieved.”

House prices fell 5.5 percent on the year, Rightmove said. Values dropped the most on the month in East Anglia, the North and the Southeast. Prices slipped 0.1 percent in London. They rose in the East Midlands, Wales and the Northwest.

Mortgage Costs

Mortgage lenders are raising the cost of fixed-rate loans and asking for bigger down payments. Nationwide Building Society and Lloyds Banking Group Plc this month both increased the cost of their fixed-rate home loans after a jump in U.K. swap rates, used by banks as a benchmark for mortgage costs.

The drop in housing prices follows reports last week showing retail sales unexpectedly fell and manufacturers’ export orders declined to the lowest level in a decade. King said that the economy’s recovery will probably be “protracted.”

Business services in Britain such as consulting, legal firms and accountants will lose 311,000 jobs between 2008 and 2013, the CEBR said today. Output in the industry will drop 5 percent this year, the report said.

Still, more than half of U.K. companies said the country has reached the bottom of the economic cycle and business confidence is at the highest since 2008, a survey by KPMG showed in a separate report today. A majority still said they face higher financing costs and tighter borrowing.

There are other signs of a pickup. Inflation slowed less than economists forecast in May, while surveys of manufacturing and services industries improved. Both Halifax and Nationwide Building Society reported that home values jumped last month.

U.K. homebuyers are clinching smaller discounts on property prices as the housing market stabilizes, the Royal Institution of Chartered Surveyors said June 15. Rightmove said today that asking prices are still 6 percent higher than in January.

“We’re through the worst, but it will take a long time to recover,” Shipside said.

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