London Agents ‘Sold Out’ as Home Prices Reach Record

By Svenja O’Donnell

Oct. 19 (Bloomberg) -- London home sellers raised asking prices to a record high this month and led gains across the U.K. as the shortage of properties for sale intensified, Rightmove Plc said.

The average cost of a home in the capital rose 6.5 percent, the most since records began in 2002, to 416,157 pounds ($680,000), the owner of the U.K.’s biggest residential property Web site said today in a statement. Prices climbed 2.8 percent across Britain as transaction levels dropped by half from 2007.

“Some agents are virtually ‘sold out’ and are reporting available stock levels in single figures,” Miles Shipside, commercial director of Rightmove, said in the statement. “In this sort of market sellers quite naturally will be tempted to test buyer appetite at a higher figure.”

London asking prices have now surpassed the peak reached in November 2007, Rightmove said. The report shows how the credit squeeze, the construction slump and a shortage of properties have combined to skew the U.K. housing market at a time when the recession and rising unemployment have hurt affordability.

The increase in prices across the country was the biggest for October in six years, Rightmove said. The average asking price of a home rose to 230,184 pounds, up 0.2 percent from a year earlier. Prices climbed everywhere in England and Wales apart from the North and East Anglia.

In London, the district of Hammersmith & Fulham led gains with a 12.6 percent jump in asking prices on the month, followed by a 12.1 percent increase in Kensington & Chelsea. The only decline was in Westminster, where prices dropped 1 percent.

‘Acute Shortage’

“There’s an acute shortage of property,” said Robert Green, a real-estate agent at John D Wood & Co. in Chelsea, southwest London. “Demand is very strong. Also mortgage availability is improving. It’s unlikely we’ll see enough supply come to the market to see prices falling.”

Demand from foreign buyers is also helping drive up prices in central London due to the weakness of the pound, Green said. The U.K. currency has dropped about 17 percent against the euro in the past year.

“The pound is bringing many foreign buyers into the capital,” Alex Solomon, an economist at Rightmove, said in an interview on Bloomberg Television today. Still, “supply and demand is the really important factor. Supply is obviously lower than demand at the moment in London and hence that’s what’s driving prices up.”

Debt Worries

U.K. home values are rising partly because people are reluctant to take on more debt and are moving house less, curbing the supply of properties on the market, Rightmove said. Unemployment stayed close to the highest since 1995 in the quarter through August as the recession destroyed work in industries from banking to construction.

Recent house price gains may not last, Shipside said.

“The combination of economic hardship, pending taxation decisions and an imminent general election could stamp out the early stages of a housing market recovery,” he said.

The opposition Conservatives had support from 41 percent of voters in YouGov Plc opinion poll published yesterday in the Sunday Times, leading the Prime Minister Gordon Brown’s ruling Labour party by 11 points compared with 14 points a month ago. An election is due by June.

Curbs on lending may also affect the housing market. The Financial Services Authority today called for a ban on self- certification home loans after a review of Britain’s 1.2 trillion-pound mortgage market. The regulator also called for mandatory affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net