Further decline seen as govt budget cuts bite, more putting homes on sale

(LONDON) UK house prices fell this month for the first time in 15 months as the government’s budget squeeze curbed demand and more people tried to sell their properties, Hometrack Ltd said.

The average price in England and Wales fell 0.1 per cent from June to £158,700 (S$335,167), the London-based property researcher said in an e-mailed report yesterday, citing a survey of surveyors and real-estate agents. Home values in the capital led the decline, dropping 0.2 per cent. On the year, prices rose 2 per cent.

‘The fall in prices marks a turning point for the housing market,’ Richard Donnell, director of research at Hometrack, said in the report. ‘Further modest price falls are inevitable over the second half of the year as the volume of homes for sale continues to rise and demand remains weak on the back of concerns over the wider economic outlook and uncertainty over the impact of recently announced cuts in government spending.’

The number of Britons expecting house prices to rise in the next year has dropped in a ‘significant shift’ in sentiment, Rightmove plc said in a separate report yesterday. The property market’s outlook has dimmed as the nation braces for the deepest spending cuts since World War II and policy makers fret that threats to economic growth have increased.

An increase in the number of homes for sale is also depressing prices, with the amount of properties listed with estate agents rising 3.6 per cent this month, Hometrack said. In contrast, demand for homes has fallen, with the number of potential buyers registering with estate agents dropping 1.3 per cent, led by a 2.7 per cent decline in London.

‘With falling demand and rising supply, there is a real possibility of sales volumes declining,’ Mr Donnell said. ‘With no immediate prospect of an upturn in demand, price levels are likely to remain under downward pressure in the coming months.’

Yesterday’s report adds to evidence that the housing-market recovery is waning. Rightmove, owner of the UK’s biggest property website, said last week that sellers cut prices for the first time this year and will probably keep doing so for the remainder of 2010, while Lloyds Banking Group plc’s Halifax division said that house prices fell in June by the most in four months.

Confidence in future house prices has also fallen. The number of people expecting home values to be higher in a year fell to 41 per cent this month from 50 per cent in the previous quarter, Rightmove said yesterday. The company surveyed 22,010 people online between July 5 and July 19.

The drop ‘is a significant shift’, Miles Shipside, Rightmove’s commercial director, said. ‘With austerity measures starting to bite, a growing nervousness is to be expected.’

Bank of England policy makers considered adding to their emergency stimulus this month as they judged that the economy’s growth prospects had ‘probably deteriorated’.

Gross domestic product rose 1.1 per cent in the three months through June, almost twice as fast as the 0.6 per cent gain in a Bloomberg News survey of 32 economists. — Bloomberg

Source: Business Times, 27 Jul 2010

(WASHINGTON) Sales of new US single-family homes rebounded strongly in June from the prior month’s record low, driving the number of houses on the market to its lowest level in nearly 42 years.

The Commerce Department said yesterday sales jumped 23.6 per cent to a 330,000 unit annual rate from a downwardly revised 267,000 units in May. The sales pace last month was still the second lowest since records started in 1963. The percentage increase was the largest increase since May 1980, and partially unwound the prior month’s historic 36.7 per cent decline.

Analysts polled by Reuters had forecast new home sales rising to a 320,000 unit pace last month from May’s previously reported 300,000 units.

‘Right now we’re running about 60 per cent below the average annualised rate for the last decade, so there’s a lot of potential out there for improvement,’ said Michael O’Rourke, chief market strategist at BTIG LLC in New York. ‘It seems like sales are bottoming, so its just a matter of that foreclosure inventory clearing up. After that, then we can start seeing some upside. I expect that to happen later this year, maybe next year.’

US government debt prices dipped on the home sales data, while US stocks added to gains. The US dollar pared losses against the yen.

Recent data have suggested the economy’s recovery from its longest and deepest recession since the 1930s moderated somewhat in the second quarter. Economists expect weak housing activity to act as a drag on growth for much of the year.

The government is expected to report on Friday that GDP growth slowed to a 2.5 per cent annual rate in the April-June period from a 2.7 per cent pace in the first three months of the year.

The Commerce report suggested the housing market may be close to working through the distortions following the end of a popular home-buyer tax credit in April, an incentive that brought forward sales. Data last week showed home construction fell to an eight-month low in June, while sales of existing home sales were the lowest in three months.

Analysts, however, believe a drop in home building is unlikely to ignite a new recession since housing is a much smaller share of the economy now than it was at the top of the housing boom. The impact of a 10 per cent drop in home construction has about one-third the impact now as it did in 2006, according to economists at Bank of America-Merrill Lynch. — Reuters

Source: Business Times, 27 Jul 2010

Industrial production records first fall in 7 months on sharp slowdown in biomed

(SINGAPORE) June’s factory output fell short of expectations for the first time this year, as a slowdown in pharmaceutical output put the brakes on manufacturing’s acceleration.

Industrial production last month rose 26.1 per cent from a year ago, way under consensus expectations for 36.7 per cent growth. Factories also produced 23.4 per cent less than they had in May – the first sequential, seasonally-adjusted fall in seven months.

‘The drop is very technically driven by the biomedical cluster, a segment that has provided significant impetus to growth since the start of this year,’ said RBS’s Singapore economist Lim Su Sian.

Biomedical output’s year-on-year growth slowed to 29.8 per cent as pharmaceutical plants produced 30.8 per cent more than they had last June. This was a sharp slowdown from growth in excess of 100 per cent the month before, and June’s biomed output was less than half that recorded in May.

Excluding biomedical manufacturing, overall production grew 24.8 per cent from last June but fell 1.8 per cent from May, data released by the Economic Development Board yesterday shows. Biomedical output accounts for a fifth of Singapore’s value-added, the second largest industry share after electronics’ 30 per cent.

Growth in the latter sector slowed slightly, but was still a robust 46.8 per cent year-on-year, as semiconductors output grew 74.9 per cent thanks to strong demand for cellphones, personal computers and consumer electronic products.

The other sectors – precision engineering (33 per cent), general manufacturing (11 per cent ) and chemicals (7 per cent growth) – all saw their pace of growth slow by several percentage points too.

And transport engineering’s output continued its year-on-year fall due to fewer ship conversion and repair jobs in the ship yards, which offset growth in the land and aerospace segments.

With six months of data now in, EDB said that the manufacturing economy expanded 41.6 per cent in the first half of 2010 from a year ago.

As signs of cooling off surface beneath the positive headline numbers, the second-half of 2010′s ‘tale of two halves’ appears to have begun before the halfway mark, OCBC economist Selena Ling said.

‘Are the headwinds coming from US and Europe, or China’s slowing? It’s not too clear at this stage, but the NODX numbers should show which countries’ demand is facing growing resistance,’ she said.

June’s industrial production figures also back up other signs of slowdown like rising inventories seen in June’s PMI and waning export momentum, said Citi economist Kit Wei Zheng.

HSBC economist Kim Song-yi thinks that though manufacturing will ease in coming months, the stretched labour market and wage pressures mean a tightening of monetary policy to control inflation risks is still a possibility.

Source: Business Times, 27 Jul 2010