The Retailer

U.K. house prices fell in July from the previous month as the number of new sellers outnumbered potential buyers, adding weight to forecasts that after gaining in the first half of 2010, house prices will end the year little changed from January, according to a survey by Rightmove published Monday. Separately, retail sales in London rose at the strongest annual rate in more than three and a half years in June, a sign that shoppers in the capital are more upbeat about the economy than in the rest of the U.K., according to the British Retail Consortium. But the trade association warned that the powerful increases in retail sales were unlikely to be sustained due to uncertainty about the strength of the economic recovery, the planned January 2011 increase in sales tax and looming public-sector job cuts.

The joint BRC and KPMG survey showed the value of sales in comparable stores in central London was 14.4% higher in June than in the corresponding month last year, the sharpest rise since October 2006 and far stronger that the 1.2% like-for-like increase seen in the U.K. as a whole.

In May, sales were 10.8% stronger on the year in London and 0.8% higher in the U.K. as a whole, the BRC said. Central London like-for-like sales were 10.1% stronger in the second quarter than in the corresponding period last year, but were unchanged for the U.K. as a whole.

"These are impressive results," Stephen Robertson, the director general of the BRC, said in a statement. "Customers in the capital are less pessimistic than the rest of the U.K. and significantly less so than this time last year."

The BRC said June's hot weather and sports events, such as the football World Cup and Wimbledon tennis tournament, meant fewer people were out shopping in central London, but the people who did hit the stores spent more each visit. Clearance sales helped pull in the shoppers, while the comparative weakness of the pound also continued to attract tourists, the trade association said.

But Mr. Robertson added a note of caution. "Economic uncertainty combined with the [value-added tax] increase and public-sector job cuts on the way, suggest growth of this magnitude is unlikely to continue," he said.

The steep spending cuts and tax rises announced in the British government's recent emergency budget are broadly affecting consumer sentiment and it appears that fears over jobs and earnings—following a public-sector pay freeze as well as huge number of expected job reductions in the sector over the next five years—are making Britons think again before deciding to make a large purchase such as buying a house, economists say.

House prices in mid-July fell 0.6% on the month and were 3.7% higher from a year earlier, according to Rightmove's latest index. The latest data compares with a 0.3% rise on the month and a 5% increase from a year earlier in June.

The decline in asking prices comes as around 30,000 new properties on average are being put up for sale every week, a 45% increase from July 2009. The number of potential buyers, meanwhile, remains low by comparison, with analysis for the first six months of 2010 showing sellers outnumber mortgage approvals by 5 to 2.

"The number of new mortgages being approved each month is less than half the number of new sellers," said Miles Shipside, commercial director of Rightmove.

"More aggressive pricing is now the order of the day, which means that conditions are ripe for a strong buyers' market in the second half of 2010. This is likely to see the average price gains of 7% for the first half of the year wiped out by year-end, in line with Rightmove's original forecast for the year of no net change in prices," Mr. Shipside said.

The decline in asking prices is a result of mixed pressures, with the typical U.K. seasonal summer lull weighing on prices as well as the current oversupply of property on the market, the survey says.

The detail of the survey, which is the first snapshot for July, is in line with other recent house-prices indexes reporting a fall in prices on the month in June as well as a further slowdown in annual house price inflation. U.K. lenders Halifax and Nationwide both reported a slower pace of price growth in June as the balance of supply and demand begins to shift in favor of buyers. It was this imbalance of too little supply coupled with some demand from cash buyers and those with large deposits, particularly in prime areas, that pushed house prices up in the second half of 2009 and the first few months of 2010.

Despite the unexpected buoyancy, several economists agreed with Rightmove's outlook that prices would be little changed over the course of 2010.

The details of the Rightmove survey show that the average number of properties for sale per estate agency rose for a fifth straight month in June, to 77 from 74 in May. And, the average amount of time it took to sell a property rose sharply to 86 days in July from 77, the survey shows.

By region, four of the 10 areas posted price rises, with the largest being 2.8% in the West Midlands of England, followed by a 1.8% increase in the South West. Of the six fallers, the largest was a 2.3% drop in East Anglia, while prices declined 1.7% in early July compared with June in Greater London. Rightmove measured 123,507 asking prices of properties put on sale by estate agents between June 12 and July 10.