More gloom over housing market

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The Independent Online

Economics Correspondent

More gloom settled over the housing market last month, according to two surveys published yesterday. But a third survey reported that consumers were feeling more confident about personal finances than at any time in the past two years.

According to the monthly Gallup survey of consumer opinion, the negative balance of pessimists over optimists about household finances is the lowest it has been since mid-1993. "This latest result does appear to indicate a long overdue return of the 'feel-good' factor," commented Gallup.

The pollsters speculated that the improvement in consumer sentiment was due to a combination of relief at the outcome of the Conservative leadership contest and the onset of sunny weather.

However, the reports from the front line of the housing market yesterday were much glummer. Gary Skelton, marketing director at Barclays Mortgages, said: "Levels of loan approvals across the market show that lending will be flat in months to come. There is little sign of consumer confidence returning."

The Barclays Bank mortgage index showed mortgage lending in June was 3 per cent lower than a year earlier, although it had risen in both May and June thanks to the usual spring boost to house sales. The index, based on funds in solicitors' deposit accounts held at Barclays, showed that mortgage lending in the North-east and Wales last month was 10 per cent lower than a year earlier. Lending was higher than a year ago in central England, the North-west and East Anglia.

June loan approvals were flat.Barclays said figures suggested a lack of meaningful housing market recovery this year.

A separate report from the Royal Institute of Chartered Surveyors found that the balance of estate agents saying activity was rising over those reporting lower activity had dipped for the second month running.

Peter Miller, a Rics spokes-man, said: "The housing market continued to tick over slowly throughout June's political turmoil, but it is characterised by uncertainty and indecision." He said the market had fragmented, with strong demand for desirable properties but a log-jam at the bottom of the market.

There were mixed interpretations of the Gallup survey. It showed an improvement in the public's assessment for general economic prospects in the next 12 months. The overall confidence index recovered to minus 11 per cent. The balance of gloom about the general economic situation and the balance expecting unemployment to keep rising both shrank a little.

Adam Cole, an economist at James Capel, said the survey was pointing to a steady, unspectacular recovery in consumer spending. "The Government's problem is not lack of 'feel-good factor' among consumers but a lack of credit for improving the economy," he said.

David Hillier, UK economist at NatWest Markets, said confidence remained relatively weak. "Fear of unemployment is taking its toll," he said. The balance expecting joblessness to rise had stayed around the same level for a year despite continued monthly declines in the unemployment count, while the overall Gallup index was still close to its level at the trough of the recession.