LONDON--The U.K. housing market is suffering despite
government-backed schemes and there is no sign of a significant
improvement any time soon, analysts said.
Figures from global accountancy firm PricewaterhouseCoopers
Tuesday showed 169 real estate firms--estate agencies, lettings
agencies and real estate developers--became insolvent in the second
quarter of this year. That's up from 167 in the first quarter and
156 in the second quarter of last year.
"Although small, the increase in insolvencies is unwelcome and
suggests the outlook for the real estate sector remains
challenging," said Mark Batten real estate restructuring partner at
PwC. "2012 looks set to be a tough year."
House prices are at similar levels to a year ago. According to
lender Halifax, the average house cost 162,417 pounds ($255,400) in
June this year compared with GBP162,799 a year earlier. Bank of
England data Monday showed there was a net mortgage repayment of
GBP355 million pounds in June, representing only the fourth net
repayment in the past two years, while the number of mortgage
approvals totaled a 16 month low of 44,192.
It represents a disappointing trend for a sector the government
is hoping could give a much needed boost to the U.K. economy that
has contracted in each of the past three quarters, with the 0.7%
fall reported in the second quarter of this year the steepest drop
since the first quarter of 2009.
A NewBuild program, launched earlier this year, offers cheaper
government-backed 95% mortgages for buyers purchasing a newly built
home. It still hasn't translated into a significant uptick in the
housing market, or the economy.
The U.K. Treasury and Bank of England's Funding for Lending
Scheme starts Wednesday aimed at giving lenders access to cheaper
funding than currently available on the wholesale markets, but only
in return for an increase in lending to U.K. consumers and
businesses.
Analysts don't expect the scheme to have a speedy impact on
mortgage approvals.
"The low level of consumer confidence and recent tightening of
credit conditions suggest that approvals are likely to remain
depressed in the second half of this year," said Samuel Tombs, U.K.
economist for Capital Economics.
In recent years there has been a close relationship between
rising house prices and an increase in consumer spending. So, while
a rise in house price tends to translate into increased spending,
the current stability in house prices translates into weak spending
levels.
"The fundamentals driving the housing market are still
unsupportive and the underlying picture is weak," said Nida Ali,
economic adviser to the Ernst & Young ITEM Club.
Indeed, PwC figures showed 644 construction businesses--which
are among those being targeted by the government's growth
plans--became insolvent in the second quarter of this year. Thats
the lowest number since 629 in the fourth quarter of 2010 and
compares with 759 in the first quarter and 694 in the second
quarter of 2011.
"These figures are disappointing for the industry, but not
unexpected given the significant slowdown in work, particularly in
the public sector," said PwC director Dominic Wilson.
-Write to Ilona Billington at ilona.billington@dowjones.com
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