U.K. Housing Market Shows First Increase Since 2007 (Update1)

By Svenja O’Donnell
Sept. 15 (Bloomberg) -- The U.K. housing market may have stabilized after more surveyors reported a gain in home values than a drop for the first time in two years, a report by the Royal Institution of Chartered Surveyors showed.
The number of respondents surveyed saying prices rose in August exceeded those reporting declines by 11 percentage points, the first positive reading since July 2007, the London- based organization said today in a statement. The number of properties for sale per real-estate agent has fallen by about 23 percent from a year earlier, RICS said.
The report adds to evidence that Britain’s housing-market slump has paused after price declines of 15 percent since the peak in 2007 on Nationwide Building Society’s measure. While the economy has shown signs of returning to growth, unemployment has risen to a 14-year high and may provoke further declines if job losses force homeowners to sell their properties.
"It’s fair to say that a lack of supply is driving the rise in house prices," Simon Rubinsohn, chief economist at RICS, said in an interview on Bloomberg Television. "It would be foolish to believe prices are going to go up in a straight line from where they are now. I think 2010 will be a more difficult year."
London, the South East and the South West of England showed the most widespread price increases, RICS said. The number of surveyors reporting gains in the capital exceeded those reporting declines by 43 percentage points.

Buyer Enquiries

The balance of surveyors reporting an increase rather than a decrease in new buyer enquiries dropped to 49 percent in August, from 61 percent in July. Newly agreed sales fell to 34 percent in August, from 45 percent the previous month.
"There is a complete shortage of new properties so prices are increasing, as are buyer enquiries," said Robert Green at John D Wood & Co. in Fulham, south-west London. "Agreed sales could fall as a result."
The number of sales per real estate agent was 17 in the last three months, the most since May 2008, RICS said.
Hometrack Ltd. said on Aug. 31 house prices rose for the first time in two years in August. Nationwide Building Society said the previous week that house prices increased 1.6 percent, the fourth consecutive monthly gain and the biggest since 2006.
Commercial real-estate values climbed in August for the first time in more than two years, Investment Property Databank Ltd. said in a report yesterday. Values of stores, offices and warehouses in the U.K. rose 0.2 percent from July.

Contraction

At the same time, the U.K. economy shrank 0.7 percent in the second quarter and unemployment rose to the highest since 1995. Banks are curbing lending even after the Bank of England reduced its key rate to a record low 0.5 percent and pumped cash into the banking system with cash by buying billions of pounds of assets with newly created money.
Ernst & Young LLC’s Item Club said in a report yesterday that the U.K. housing market slump will resume next year as the squeeze on mortgage lending persists, adding that recent reports of price gains constitute "a false dawn." Bank of England data on mortgages show the number of approvals is less than half the total in the same month two years ago.