UK Aug House Prices Slump on Month; Consumers Downbeat On Finances …

by Shelton on August 24th, 2012

filed under Finances

UK households continue to feel the pinch as house prices post their biggest drop on record for the month of August while Britons spending plans remained constrained, a trio of surveys showed Monday.

Online estate agency Rightmove said UK house prices fell 2.4% on the month in August following a 1.7% fall in July.

Estate agents are always aiming to win new sellers, but if whats already on the market isnt shifting then the best advice they can give to potential new sellers is to undercut those properties already failing to sell, said Miles Shipside, Rightmove director and housing market analyst.

Rightmove also reported prices were 2% higher in August compared with a year ago, a lower gain than the 2.3% year-on-year increase reported in July.

The survey shows that the number of new sellers in August was higher than a year ago and could suggest there are more home-owners who are in a position where they must sell their home. That could be due to a number of reasons, including difficulties in making their monthly mortgage repayments to fears over job security.

According to data firm Markit and high street bank Lloyds TSB, the majority of consumers are still experiencing tough financial conditions. Both released surveys Monday showing that consumers remain cautious over spending plans and said weak earnings growth meant that despite the slower pace of inflation, cash availability fell in July from June.

Markit, however, said there was a welcome, if small, sign of improvement as its overall household finances index rose to a balance of 38.9 in July from 37.5 in June was the least negative–a balance below 50 signals a deterioration in personal finances–for over two-and-a-half years, lifted higher by a stabilization in debt levels as well as expectations of lower inflation.

The overall strain on finances was the least marked since December 2010, and hopes of a reduced squeeze on real incomes meant that households are the least downbeat about the financial outlook for almost two-and-a-half years, said Tim Moore, senior economist at Markit.

Less welcome will be the muted household spending patterns shown by Augusts survey, which add to concerns about worsening business conditions at home and in key export markets, Mr. Moore said.

It is the lack of cash flowing through the economy that is weighing on the economy–UK gross domestic product has contracted for three straight quarters–and a major concern for the Bank of England and government, leading to the creation of the funding for Lending Scheme.

The BOE and UK Treasurys FLS opened for business earlier this month in the hope that banks will increase mortgage and businesses lending in return for cheaper funds from the central bank.

With UK house prices having fallen on the month more often than they have risen so far year, it is becoming more of a buyers market. This development could actually drive demand for mortgages, and if the FLS works and does encourage more lending, it could boost activity in the sluggish housing market as well as helping to get more money back into the economy.

Indeed, the surveys show that the FLS couldnt have begun soon enough as financial concerns and ongoing fears over job security remain.

News that the economy shrank in the second quarter of the year would appear to be dampening spirits towards the UKs financial situation, said Jatin Patel, director of current accounts at Lloyds TSB.

Annual growth in essential spending is not putting downward pressure on budgets in the same way as it was earlier in the year, but with income growth still weak, we are yet to see any noticeable improvement in the amount of money people have left over for discretionary purchases. Until we see this, spending on the high street will likely remain subdued for many in the near future, Mr. Patel said.

Write to Ilona Billington at ilona.billington@dowjones.com

Copyright copy; 2012 Dow Jones Newswires

TEXT-Fitch:Malaysian growth supportive, but fiscal pressure remains

by Shelton on August 24th, 2012

filed under Finances

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  • (The following statement was released by the rating agency)
    Aug 20 – The strong contribution of public-sector spending and investment to economic growth
    may sustain pressure on Malaysias public finances, Fitch Ratings says. Malaysias high level…

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