UK house sentiment lowest since 1978

The Royal Institution of Chartered Surveyors' measure of sentiment in the UK housing market fell to the lowest since records began in 1978 in March as mortgage lending dried up.

The number of residential property agents and surveyors saying prices declined exceeded those reporting gains by 78.5 percentage points in March, compared with 65.7 points in February, RICS said yesterday.

A separate gauge of price expectations dropped to the lowest since at least 1998.

Falling house prices threaten to exacerbate the slowdown in the economy, which may grow 1.6 percent this year, the least since 1992, the International Monetary Fund predicts. The Bank of England cut the benchmark interest rate for the third time since December this month after banks raised borrowing costs and curbed mortgage lending.

"The situation we have is serious and it will get worse," said David Stubbs, an economist at RICS. "It will take more interest-rate cuts and a restoration of confidence before we see a return to health."

Revenue at shops open at least a year fell for the first time in two years in March, declining by 1.6 percent from the same month in 2007, the British Retail Consortium said. The group, which represents 80 percent of UK retailers, conducted its survey of stores from March 2 to April 5.

"Here is the strongest evidence yet that customers are making serious economies and are increasingly concerned about the future," Stephen Robertson, director general at the BRC, said in a statement.

Gains in consumer prices are also eroding shoppers' spending power. Inflation stayed at 2.5 percent in March, the statistics office said yesterday.

The RICS balance of buyers registering with property agents fell to minus 49, the lowest since March 2003. The price balance for London dropped to minus 76 from minus 60, the lowest since February 2003. The only region where home values rose was Scotland, the report showed.

"We are finding it harder to get applicants to view," said Richard Cotton, a surveyor at Cluttons in London's Holland Park neighborhood. "They feel the market is dropping."

Prime Minister Gordon Brown, whose reputation for economic competence is threatened by the housing slump, says the economy will remain resilient this year. Unemployment is at the lowest since 1975, and manufacturing in February unexpectedly climbed to the highest level in seven years.

Banks are making it harder for Britons to secure mortgages after the collapse of the US subprime market, which will result in $945 billion in losses worldwide, the IMF predicts.

The credit squeeze may lead to almost 20,000 job losses in London's financial services industry in the next two years, and employment levels may not recover until 2012, the Centre for Economic and Business Research Ltd said on April 13.

Agencies

(China Daily 04/16/2008 page17)