Jennifer Ryan, Bloomberg.com, March 11, 2008
March 11 (Bloomberg) -- The U.K. housing slump deepened in February and is now the worst since the eve of the nation's last recession in 1990, a survey of real-estate professionals showed.
The number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 64.1 percentage points in February, the most since June 1990, the Royal Institution of Chartered Surveyors said today. In London, the balance was the worst since May 2003. A separate report showed annual retail sales growth slowed in February.
Bovis Homes Group Plc, the U.K.'s most profitable homebuilder, yesterday urged the Bank of England to take ``decisive action'' and cut its benchmark interest rate further from the current 5.25 percent. Policy makers are assessing the need to shore up economic growth after the end of a decade-long housing boom against the threat of inflation.
``The credit squeeze has really begun to eat away at demand and that's contributing to the sharp downturn,'' Simon Rubinsohn, chief economist at RICS, said in an interview on Bloomberg Television. ``It's a pretty stark message to policy makers and those participating in the residential market.''
The survey's result was the lowest since the advent of the U.K.'s last recession. In the second half of 1990, the economy started a contraction which lasted five quarters.
Every region apart from Scotland showed price declines in February, with the worst result in Northern Ireland, where a net 95 percent of respondents reported a drop in home values. Across the U.K., stocks of unsold property rose more than 8.5 percent to the highest since October 1998, RICS said.
U.K. annual house-price gains slowed in January, according to a separate report today from the Department for Communities and Local Government. Home values rose 8 percent from a year earlier, compared with 8.4 percent in December.
``It's very obvious that people coming in are either anxious sellers, or cheap-stake buyers looking for a bargain and wanting to heap more misery on sellers,'' Anwell Griffith, a surveyor at Lexicon Surveying Services in Walthamstow, northeast London, said in RICS's report.
Banks, with losses and writedowns totaling almost $190 billion, have curbed lending and avoided passing on the bank's two quarter-point interest-rate cuts since December in full.
The average rate on loans for 95 percent of the price of a property, fixed for 24 months, rose to 6.55 percent, the highest since September 2000, according to data released by the Bank of England today.
Bovis had a record slide in London trading yesterday after second-half profit declined 17 percent and the company said prices won't improve this year.
Retailers have also called for rate cuts. The bank ``needs to take action sooner rather than later,'' Stephen Robertson, director general of the British Retail Consortium, which represents 80 percent of U.K. stores, said after policy makers kept the benchmark rate unchanged on March 6.
Revenue at outlets open at least a year climbed in February by 1.5 percent from the same month in 2007, compared with 2.6 percent in January and 3.3 percent in February 2007, the BRC said today. The group's survey of stores was conducted from Feb. 3 to March 1.
Kingfisher Plc, Europe's largest home-improvement retailer, said Feb. 21 that fourth-quarter sales dropped after the U.K.'s housing market slump discouraged spending.
``All this -- alongside ongoing intense financial market strains -- fits in with our view that the U.K. economy, and especially consumer spending, will continue to slow sharply in coming months and quarters,'' Michael Saunders, chief western European economist at Citigroup Inc., said in a note about today's data.
The economy expanded 0.5 percent in the quarter through February, down from 0.6 percent in the previous three months through November, the National Institute of Economic and Social Research said today.
The London-based group, whose clients include the central bank and the Treasury, said the slower pace of growth ``is to be welcomed'' and is not a sharp enough deterioration to warrant a faster pace of interest-rate cuts.
``The bank is known to be concerned about inflationary risks and it obviously also understands that the growth rate is not a major concern,'' the group said in a statement.
RICS's Rubinsohn also said that the bank should pause before cutting rates further as it assesses the threat of inflation to the economy.
``If one looks at the wider economy the case for an immediate rate cut isn't compelling,'' Rubinsohn said. ``I'm not sure it's wise for the bank to respond immediately to these figures.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net.