U.K. House-Price Gauge Rises to Near 3-Year High, RICS Says

By Svenja O’Donnell

Nov. 10 (Bloomberg) -- A gauge of U.K. house prices rose to the highest level in almost three years in October, led by London, as a shortage of homes for sale intensified, an industry report showed.

The number of real-estate agents saying prices rose exceeded those reporting declines by 34 percentage points, up from 21 points in September and the most since December 2006, the Royal Institution of Chartered Surveyors said in its monthly survey today. A separate British Retail Consortium survey showed stores posted their best October sales growth since 2002.

“There is a lot of evidence to suggest that there is a fair degree of momentum in the market,” Simon Rubinsohn, chief economist at London-based RICS, said in an interview with Bloomberg Television. “The context of all of this is still going to be a general shortage of desirable property.”

Buyers are returning to the housing market after values fell as much as a fifth from their peak in 2007. Bank of England policy makers last week slowed the pace of bond purchases amid signs that rising property and stock markets are helping the economy shake off its worst recession in at least three decades.

The sales-to-stock ratio, a measure of slack in the housing market, rose to 30 from 29 in September, the report showed. Average sales per surveyor over the last three months climbed to 19 from 18.5.

The upturn in house prices was led by the U.K. capital, where the net balance of surveyors saying prices rose jumped to 95 points, the most since December 1996, RICS said.

Limited Supply

“We are continuing to see an increase in demand from potential purchasers and with only a limited supply of properties coming onto the market, prices are continuing to rise,” said James Perris at De Villiers Surveyors in central London.

Services, manufacturing and house prices are showing signs of recovery as consumer confidence grows. Mortgage approvals climbed to their highest level for 18 months in September, and data from Lloyds Banking Group Plc’s Halifax division showed home values rose twice as much as forecast in October.

Sales at U.K. stores open at least a year rose 3.8 percent in October from a year earlier, the BRC said today. Sales dropped 2.2 percent in October 2008 after the collapse of Lehman Brothers Holdings Inc. sent consumer confidence tumbling.

Rising unemployment may yet weigh down on spending and home values. London-based broker Savills Plc said on Nov. 6 that house prices probably will fall as much as 6.6 percent next year, reversing an estimated 3.7 percent gain in 2009.

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