UK Estate Agents Expecting House Price Drop

Bloomburg Business Reports; U.K. real-estate agents are losing faith in the outlook for house prices, signalling values are set to fall this year, according to KBC Peel Hunt.

The CHART OF THE DAY compares the balance between British estate agents and surveyors seeing price gains in the previous three months and those seeing declines, as compiled by the Royal Institution of Chartered Surveyors, with the annual growth in sellers’ asking prices as measured by Rightmove Plc.

Britain’s housing-market recovery has shown signs of slowing this year as the RICS balance dropped from a three-year high in November to its lowest in 11 months in June. That signals values are set to fall later this year, said KBC Peel Hunt housing analyst Robin Hardy. Home sellers cut prices for the first time this year in July, Rightmove said yesterday.

“It’s a leading indicator that is showing the people who set pricing are losing confidence in the strength of pricing,” London-based Hardy said, referring to RICS. “If they tell you that house prices are going to fall, they’re telling you they’re going to be advising people to cut their prices. It’s as good as going and spraying it on a wall with aerosol cans.”

The average asking price for a U.K. house fell 0.6 percent this month and will drop 7 percent in the second half, said Rightmove, the operator of Britain’s biggest property website. The deepest government spending cuts since World War II to curb the record deficit and an increase in the number of homes being put up for sale will put pressure on prices, Hardy said.

“We’re probably looking at a drop of 4 percent in 2010 and why would that trend reverse in 2011?” he said. “There’s going to be property coming back on to the market in greater quantities and there’s going to be fewer and fewer people to buy them. It’s the creation of a negative pricing spiral.”