U.K. Housing Market May Take Nine Years to Recover
By Simon Packard
April 10 (Bloomberg) – British home prices may decline for
another three years and probably won’t advance beyond their
current levels until 2017, broker Tradition Financial Services
said, citing property-derivatives prices.
Investors bet that average prices will slide to 163,932
pounds ($325,000) in March 2011, derivatives pegged to an index
compiled by HBOS Plc show, according to TFS. The Bank of England
today cut the benchmark interest rate for the third time since
December in an effort to avoid a recession.
HBOS, the U.K.‘s largest mortgage lender, said April 8 that
prices fell 2.5 percent to 191,556 pounds in March, the biggest
monthly drop since 1992. Banks have become reluctant to lend or
to reduce borrowing costs as a result of the U.S. subprime-
mortgage crisis. That’s accelerated a slump in the housing
market, following a decade in which prices almost tripled.
Those who trade U.K. house-price derivatives foresee the credit crunch having a longer impact on the housing market than previously predicted,'' said Peter Sceats, director of real estate at TFS. The U.K. central bank lowered the bank rate by a quarter point to 5 percent, as predicted by 52 of 61 economists in a Bloomberg News survey. The rate cut won’t make much, if any difference to U.K.
homeowners in the short term,’’ said Neil Chegwidden, head of
residential research at real estate consultant Jones Lang
The International Monetary Fund said last week that
Britain’s housing market is among the most likely in Europe to
follow the slump in the U.S.
Federal Reserve policy makers have made seven rate cuts
since September, shaving 3 percentage points off borrowing costs,
and that has failed to spur a housing recovery. The average rate
for a 30-year fixed mortgage dropped half a percentage point
during that period to 5.88 percent last week, according to
Freddie Mac, the world’s second-largest mortgage buyer.
TFS is owned by Viel & Cie., a Paris-based financial broker.