U.K. House Prices Fall In August

Home sellers in the U.K. reduced their asking prices in August after hiking slightly in July, but sentiment continued to improve, property website Rightmove said Monday.

Average asking prices dropped 2.2% month-on-month to GBP 222,762 in August after rising 0.6% in July. Compared to the previous year, prices were down 3.1%, the same pace as in July.

“In spite of pent up demand, the market and pricing is boxed in by restrictive lending criteria put in place to ration mortgages given the lack of funds available to lenders,” Rightmove’s commercial director Miles Shipside said.

The Rightmove said the monthly fall in August comes despite fresh stock scarcity. “It re-enforces the fact that we will see a period of bumping along the bottom before we return to consistent growth in house prices,” the Web site said.

New sellers in August were down 48% compared to the pre-crisis period due to the continuing tight mortgage lending criteria. The number of new sellers is 82,700 this month, down 23% from 106,855 recorded last year.

Shipside said, “It is highly likely that the historic norm of new sellers coming to market is consigned to the history books. Even with a return of equity, employment and wholesale mortgage funding, these levels of sellers may never be seen again.”

However, sentiment continued to improve in the housing market as 75% of home movers do not expect prices to fall in the next twelve months.

Earlier this month, the Royal Institution of Chartered Surveyors said a large proportion of real estate agents now expects increases in house prices. The Nationwide building society said in June that house prices would be in a better shape by the end of this year compared with the beginning.

On August 12, Bank of England Governor Mervyn King said the world economy remains in a deep recession and the global financial system is in a fragile condition.

Though the British economic contraction is slowing, the number of unemployed hit a fourteen-year high in the three-months to June. The jobless number is expected to rise further, reducing the number of buyers in the housing market.

U.K.’s GDP declined 0.8% quarter-on-quarter in the second quarter, after falling 2.4% in the first three months of the year.