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U.K. house prices extended their fall in January as demand plunged the most in three years on concern about the outlook for the economy, Hometrack Ltd., who survey 5100 estate agents, said today. The average cost of a home fell 0.5% from December to £153,600, a seventh straight drop, and demand, measured by the number of new buyers registering with agents, dropped 9.5%. “Concerns over the economic outlook and the biting reality of spending cuts are doing little to improve a fragile market defined by weak consumer sentiment and a lack of demand,” Richard Donnell, Hometrack’s director of research, said in the report. “It is the change in demand that we need to pay most attention to, as this will have the greatest impact on pricing levels in the first half of 2011.” The drop in demand this month was the biggest since a decline of 11.5% in January 2008. It has fallen by 26% in the past six months, according to Hometrack. The number of new homes listed for sale this month fell 5.4%, the most in four years. From a year earlier, house prices fell 2.2% in January, and Donnell said prices will remain under “downward pressure” in the short term. In addition to the weakening recovery, confidence among consumers has been dented by inflation, which accelerated to 3.7% in December, eroding spending power. The consumer-price gains have also raised the prospect of an interest-rate increase. “The prospect of higher interest rates and increased mortgage costs mean that few will be considering moving house,” Donnell said. “In short, demand for housing is, over the coming months, likely to fall further.” Residential house prices for larger family homes across the UK have departed from valuations based on their rental value, as many punters are now finding, when they look for rental property, and this may force a correction of values on those properties in line with the fundamentals. Looking for Businesses for Sale or Commercial Property for Sale agents, find lettings and investment property in the UK? www.ukbusinessproperty.co.uk
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