U.K. House Prices Post First Gain in Two Years, Hometrack Says

By Brian Swint

Aug. 31 (Bloomberg) -- U.K. house prices rose for the first time in two years in August as a dearth of homes for sale pushed up prices in London and the southeast, Hometrack Ltd. said.

The average cost of a home in England and Wales rose 0.1 percent from July to 155,800 pounds ($253,000), the London-based property research company said in an e-mailed statement today. The increase, the first since July 2007, left house prices 6.7 percent lower than a year earlier, the smallest annual decline in a year.

The report adds to signs that Britain is emerging from the sharpest recession in more than six decades. The slump has pushed house prices down 12 percent since the peak in September 2007 on Hometrack’s measure. Bank of England Governor Mervyn King said this month that any recovery will be “slow.”

“After seven consecutive months of rising demand, agents and surveyors now believe that prices can be pushed upwards without any detrimental impact on sales volumes,” said Richard Donnell, director of research at Hometrack. “The headline figures are being skewed by price rises that are restricted to relatively small pockets of the market suffering from a lack of housing for sale.”

Prices rose in Greater London, East Anglia and the southeast of England, Hometrack said. Prices were unchanged across the other seven regions surveyed.

Other reports show home values rising at a faster pace. Prices in England and Wales rose 1.7 percent in July, the most since 2004, the government said Aug. 28. House prices increased 1.6 percent in August, the fourth consecutive monthly gain and the biggest since 2006, Nationwide Building Society said last week.

‘Fundamental Obstacles’

The economy shrank 0.7 percent in the second quarter and unemployment is the highest since 1995. Banks are still restricting lending even after the Bank of England cut its key rate to a record 0.5 percent and flooded the banking system with cash by buying billions of pounds of assets with newly created money.

The difference between the average two-year mortgage rate of 5.18 percent and the two-year swap rate of 3.14 percent is the widest on record, Moneyfacts Plc said last week.

“Some of the fundamental obstacles to a sustainable housing market recovery still remain,” Donnell said. “Mortgage availability continues to be an issue for first-time buyers who require large deposits to access the market, while unemployment levels, set to rise further, will continue to impact buyer confidence.”

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