U.K. House Prices Fall as Sales Drop to Lowest Level Since at Least 1978

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September 09, 2008 11:10 AM

Dear Smart Investor

I have been sending reports since long predicting weak and weaker U K and European economies along with US.

Here is a proof. Let me tell you in US and UK , housing is a very big sector. US housing sector is as big as 20%+ of its GDP. UK follows US.

Where this huge investment outflow from Housing sector will go? It would certainly be looking for safer assets. Like treasury papers, and Gold at current level. I do not see any third safer asset as of now in the world.

Even treasury bonds are also in issue, as world’s largest treasury that is US treasury, has accepted all junk mortgage and bonds on its balance sheet to bail out broke firms.

U.K. House Prices Fall as Sales Drop to Record Low, RICS Says

By Svenja O’Donnell

Sept. 9 (Bloomberg) — U.K. house prices dropped in August as the squeeze on mortgage lending pushed down sales to a record low, the Royal Institution of Chartered Surveyors said.

The number of real-estate agents and surveyors saying prices fell exceeded those reporting gains by 81 percentage points, compared 83 percentage points in July, the group said today in London . Average sales per respondent in the past three months fell to 12.7, the least since the survey began in 1978.

“A lack of mortgage liquidity is the key issue which is keeping the housing market from showing any real sign of recovery,” Jeremy Leaf, a spokesman for RICS, said in a statement. “While money is scarce, many will continue to be denied the next step on the property ladder.”

The housing-market slump has helped stall the economy and threatens to push it into a recession, prompting Prime Minister Gordon Brown‘s government to propose measures last week to spur home-buying. Bank of England policy makers kept the main interest rate 5 percent for a fifth month on Sept. 4, as inflation risks prevented them from cutting borrowing costs to bolster growth.

All 12 regions tracked by RICS showed negative balances on the month, led by Yorkshire and Humberside and the East Midlands . Both had readings of minus 95, before adjusting for seasonal swings. London had a reading of minus 70, making it the best- performing region.

`Bad News’

“The market continues to be depressed with continuous bad news from banks, the economy,” said Richard Cotton, an estate agent at Cluttons in London ‘s exclusive Hyde Park district. “Where is the market going? — down.”

House prices fell 12.7 percent from a year earlier in August to 174,178 pounds ($306,000), HBOS Plc, Britain ‘s biggest mortgage lender, said on Sept. 4. The annual drop was the biggest in at least a quarter-century.

Real-estate professionals remain pessimistic about the housing market, the RICS report shows. The balance of agents predicting sales will fall further was minus 8, from minus 5 the previous month. Some respondents said they had sold less than one home per week.

U.K. mortgage approvals fell for a 12th month to the lowest since at least 1999, the Bank of England said Sept. 1. Banks granted 33,000 loans for house purchase, the fewest since comparable data began nine years ago.

Brown’s government suspended stamp duty tax on homes bought for less than 175,000 pounds last week and said it will bring forward spending to help spur the property market.

The housing slump has hurt consumer spending. Sales in U.K. shops open at least a year fell an annual 1 percent in August, the British Retail Consortium, which represents 80 percent of stores, said in a separate report today. Clothing, footwear, furniture and household goods led the drop.

Gross domestic product was unchanged in the second quarter from the first three months of the year, ending the nation’s longest stretch of economic growth in more than a century.

The central bank predicted in August that the economy will grow about 0.1 percent on a year-on-year basis in the first quarter of 2009, while inflation will reach 5 percent, the fastest pace since at least 1997.

Regards,

Dhaval Shah

Investment Academy | Baroda | 09825528815

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