U.K. House Prices Jump, Confidence Rises to Highest in a Year

By Svenja O’Donnell and Brian Swint

Aug. 5 (Bloomberg) -- U.K. house prices jumped almost twice as much as economists forecast in July and consumer confidence rose to the highest in more than a year, adding to evidence that Britain is shrugging off the recession.

Home values climbed 1.1 percent to an average of 159,623 pounds ($269,850), Lloyds Banking Group Plc’s Halifax division said in an e-mailed statement today. The median forecast of 15 economists in a Bloomberg News survey was for a 0.6 percent increase. Nationwide Building Society’s index of consumer sentiment rose to 60, the highest since May 2008.

The housing market is “significantly more stable” and in a better condition than expected, Peter Redfern, chief executive officer of homebuilders Taylor Wimpey Plc, told Bloomberg Television today. The Bank of England will assess tomorrow if signs of an economic recovery are strong enough for it to stop buying assets with newly printed money.

“Over the last month or two we’ve had significantly stronger survey data,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “Maybe there is clearer evidence of stabilization and maybe the economy is gaining a bit of traction. My sense is the Bank of England would quite like to pause” its asset purchases.

House prices rebounded after a 0.4 percent drop in June, Halifax said. Compared with July of last year, home values fell 9.9 percent.

Homebuyer Demand

“Demand for homes has risen, albeit from a very low base, since the start of the year, driven by improvements in affordability and low interest rates,” Martin Ellis, an economist at Halifax, said in the statement. “Higher demand has combined with the low levels of property available for sale to boost sales activity from exceptionally low levels and support prices over the past few months.”

Homeowners expect the value of their properties to rise 0.5 percent in the next six months, the most since December 2007, Nationwide’s report showed. Its consumer confidence index climbed one point from the previous month. TNS surveyed 1,000 people for Britain’s biggest customer-owned lender between June 22 and July 19.

“Consumers might have been reassured by reports that the housing market may be starting to recover,” Martin Gahbauer, Nationwide’s chief economist, said in a statement.

Shop-price inflation is slowing, helping purchasing power, the British Retail Consortium signaled in a separate report today. The annual rate of price gains in stores was 0.5 percent in June, the lowest in seven months. Annual gains in food prices slowed to 3.8 percent, and prices for non-food items fell 1.3 percent on the year, the BRC said.

Factory Output

While surveys have shown improvement in the economy, official statistics have yet to indicate a recovery has become entrenched.

Factory output probably fell for a second month in June according to the median of 25 economists in a Bloomberg News survey. The Office for National Statistics will publish that data at 9:30 a.m. today in London.

The recession has kept pushing up unemployment, which reached the highest since 1995 in the quarter through May. The U.K. economy contracted 0.8 percent in the second quarter after shrinking 2.4 percent in the previous three months.

A measure of hiring for permanent jobs fell in July for the first time since February, KPMG and the Recruitment and Employment Federation said in a separate report today. The gauge of permanent staff appointments by job consultants slipped to 46.1 from 48.6.

Rising Unemployment

“We are cognizant of rising unemployment and constraints on consumer spending generally,” Ralph Topping, chief executive officer of William Hill Plc, told reporters yesterday. The U.K.’s second-biggest bookmaker forecast that full-year betting- shop profit would be lower than analysts predicted.

The Bank of England, whose benchmark interest rate is at a record low of 0.5 percent, will decide tomorrow whether to extend its 125 billion pound ($211 billion) asset-purchase program. Economists are split on the outcome, with 21 out of 44 in a Bloomberg News survey predicting no expansion of the plan and the remainder forecasting that the bank will seek to spend at least another 25 billion pounds.

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.