For the fifth week 10 year government bonds rose. Some reports say that the economic recovery may be very slow and that the country may sink back into recession. The office for national statistics says that investment by British businesses has fallen 1.6% from the first quarter of 2010. The policy maker of the bank of England says that there is a real risk of a second recession. The U.S central bank has declared that it will provide additional monetary support as and when required.
Some experts however, report that the economy of U.K. has expanded to 1.2% in the second quarter of 2010. This is because the country’s economic recovery is gaining momentum. Moreover, consumption has grown and even services and construction sector has gained momentum. This supports the view that the country is recovering from recession. However, the situation is debatable.
The U.K bonds may show gains later but now economists speak of consumer trust and declining house prices.
Home values in U.K have dropped in August, the most in 16 months. This was because the housing market went through a modest re-pricing that will most probably last almost a year. There was a drop of 0.3% in the average cost of a home, from the previous month. This is the biggest drop witnessed since April 2009. This report has been prepared by a leading reporting agency which also says that the housing market is weakening. The report also predicts that economists in the future will show that banks have granted the fewest mortgages in more than one year, in the last month. The economy of Britain is fragile and Britain needs to expand its emergency stimulus to recover. This has been said by Charles Bean, the deputy Governor of the Bank of England.
There is a growing weakness in the demand side. In the supply side, the supply of homes has improved considerably. Due to scarcity of homes for sale in the year 2009 home prices had risen. U.K based banks have approved about 46,500 mortgages in the month of July 2010. This (the number of mortgages approved) is the lowest in 14 months.
Some more surveyors, almost 8% of them have reported about a fall rather than rise in prices. It is also to be noted that the demand for property has also fallen in a row from -6 to -10. The average number of properties on the books of the surveyors also rose by 4.1% from June 2010. The average as on June 2010 is 69.1%. However, the average number of sales per surveyor stayed at 16.6%. Due to this, the sales to stock ratio have fallen to 24%, which is the lowest since June 2009. The spokesperson of the Royal Institute of Chartered Surveyors, Ian Perry, says that the fall in house prices reveal the increase in supply and the cautious buying trends of the buyers. It has been estimated that this trend will continue till the second half of the year.
Some agents are optimistic about realistic pricing of homes that in turn may increase sales activity in the near future.