All about business

U.K. house prices fell in May as the squeeze on mortgage lending kept declines close to the most widespread level in at least three decades, the Royal Institution of Chartered Surveyors said.

The number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 92.9 percentage points, the group said today. That compares with 94.7 percent the previous month, which was the most since the series began in 1978. The reading for London was minus 90, close to the 14-year low of minus 92 recorded in April.

Banks approved the fewest home loans in at least nine years in April, preventing more homebuyers from making property transactions. Two-year U.K. notes fell the most in 10 years yesterday as traders bet accelerating inflation will force the Bank of England to raise interest rates even as the economy faces the threat of a recession.

“While demand remains weak and housing transactions continue to evaporate, there is a very real danger to the wider economy,'' Jeremy Leaf, a spokesman for RICS, said in a statement.

Every region tracked by RICS showed prices declining over the past three months. In London, more real-estate agents have reported price drops than gains for seven consecutive months.

`Financial Woes'

“Financial woes are still the main worry affecting the housing market in central London,'' said Benson Beard, an estate agent with Bective Leslie Marsh in the capital. “It is likely to remain this way until the end of the year.''

Falling house prices are making it harder for Prime Minister Gordon Brown to revive the fortunes of his ruling Labour Party. Support for Labour has slipped 4 percentage points to 25 percent since early May, while the Conservative Party's support rose 5 points to 45 percent in a Populus poll, the Times said today payday advance.

Inflation, which jumped the most since 2002 in April to reach 3 percent, is also hurting the government. It has raised the prospect that the Bank of England may need to lift its benchmark rate from the current 5 percent. U.K. two-year notes fell yesterday after data showed prices charged by factories rose 1.6 percent from April, the most since at least 1986.

Increases in borrowing costs may exacerbate the housing- market downturn, which is worsening as banks halt lending. House prices fell 2.5 percent in May, the most since at least 1991, Nationwide said on May 29. The Department for Communities and Local Government said today that the pace of annual house-price gains slowed in April to 4.9 percent from 5.2 percent in March.

Retail Sales

Revenue at shops open at least a year still rose 1.9 percent from a year earlier in May, the first gain in three months, the British Retail Consortium said today. The group, representing 80 percent of stores, conducted its survey from May 4 to May 31. Manufacturing production increased 0.1 percent in April, the Office for National Statistics said today.

The cost of home loans with a 5 percent down payment rose to the highest in more than eight years in April, according to central bank data. Mortgage approvals fell to 58,000, the lowest level since records began in 1999.

“If transactions remain 50 percent lower than they were last year this has real repercussions for the wider economy,'' Simon Rubinsohn, chief economist at RICS, said in an interview with Bloomberg Television. “It's still pretty scary stuff.''

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