Wednesday, February 13, 2013

UK home prices inch up in January: report

Average price in London seen rising 31% by end of decade
The Business Times - February 12, 2013

[LONDON] UK house prices rose in January as strains in the mortgage market eased and funding costs fell, Acadametrics Ltd said.

The average price of a home in England and Wales increased 0.2 per cent to £227,478 (S$442,648), Acadametrics and LSL Property Services plc said in a monthly report published in London on Friday. From a year earlier, values gained 3.1 per cent.

The Bank of England's Funding for Lending Scheme (FLS) has shown "encouraging signs" though it's still early days to gauge its success, governor-designate Mark Carney said on Thursday. The BOE held its target for bond purchases at £375 billion and said it will reinvest the proceeds from maturing debt holdings to sustain stimulus in a "slow" recovery.

"Market conditions are certainly improving," said David Brown, commercial director of LSL Property Services. "House prices and sales in 2013 will be closely tied to how well banks cope with the financial grenades being thrown their way by regulators and the eurozone."

Acadametrics estimates that transactions rose 7.5 per cent in January from a year earlier to 47,500.

Out of the 10 regions tracked by the companies, six recorded an increase in annual prices and four posted declines, according to the report. London led gains, rising 9.4 per cent.

BOE officials are counting on the FLS, which gives banks access to cheaper funding, to stoke the economy. Mortgage approvals rose to an 11-month high in December.

Separately, KPMG LLP and the Recruitment and Employment Confederation said a gauge of permanent job placements held at 53.2 in January. Readings above 50 indicate a rise in hiring.

Permanent vacancies rose to a 21-month high.

Improvements in the mortgage market, along with signs of employment strength and increased first-time-buyer activity provide reasons for confidence in the property outlook, said Acadametrics chairman Peter Williams.

"Hopefully this will tempt more sellers back into the market," he said. "With new housing remaining in short supply, prices will be affected by such shortages, except in those areas where low demand and oversupply remain."

Meanwhile, the average price of a London home will climb at least 31 per cent to £500,000 by the end of the decade, according to a forecast by the Centre for Economics and Business Research (CEBR).

Price appreciation will be driven by the British capital's ties to fast-growing emerging markets, a "high concentration" of service firms and an economy that isn't reliant on government spending, the London-based research group said in a statement on Saturday. Other cities will experience slower growth due to cuts in government spending, it said.

"This last feature of the London economy will shield the capital from the worst effects of public-spending cutbacks," CEBR said. "High rates of immigration to the capital bring a range of skills, languages and international commercial links which are forecast to fuel London's economic and house-price growth."

CEBR expects the average London home price to be £383,000 in 2013.

Outside of London, house prices in south-east England will rise by 25 per cent on average by 2018 and residences in eastern England will climb by 26 per cent, the firm predicted.

Price appreciation will be slower elsewhere, with valuations rising 6 per cent in Northern Ireland and 2.3 per cent in north-east England, according to the statement. – Bloomberg

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