Dublin said it will meet most of its target by selling the
energy business of Bord Gais, while the previously announced
sale of a minority stake in the state’s most valuable asset, the
Irish Electricity Supply Board (ESB), is off the table.

Doubts remain over when the government might sell its stake
in Aer Lingus, with plans on hold pending more
favourable market conditions.

The government had previously said it was looking to raise 2
billion euros but had indicated it may exceed that after winning
approval to use some of the proceeds to invest in the economy as
well as pay down debt.

It said on Wednesday that one third of the amount raised
from the asset sales would be ploughed back into growth but
reiterated that it would not be pressured into fire sales.

“We’re not going to short-change the taxpayer but at the
same time we’re not going to delay,” Minister for Public
Expenditure Brendan Howlin told a news conference.

The 2 billion euros that will be used to pay down debt
represents a fraction of the 204 million euro Dublin expects its
debt to rise to by 2015.

Howlin told reporters that the sale of the Bord Gais unit
will make up the bulk of the 3 billion euros, and the sale does
not include its gas transmission or distribution system, which
will remain in state ownership.

He added that the sale of its stake in Aer Lingus did not
present the best value at today’s share prices, though the
government is “determined” to proceed.

The government added it will sell some of the ESB’s
non-strategic power generation capacity.

Speaking at an investment forum Monday with some 350 companies, Xi said Ireland’s history, scenery and culture had impressed the Chinese people.

But he made clear the country’s clout in hi-tech and emerging industries, largely due to a low corporation tax rate that has lured Silicon Valley heavyweights, was a key factor.

“Ireland is strong in software development, ICT and biotech medicines and other hi-tech industries…We give top priority to the new generation of IT and bio-tech,” Xi told delegates via a translator Monday, adding it would be the priority for future trade between the two countries.

“Ireland is a country that is strong in trade and services and this bodes well for our co-operation,” he added.

One delegate said the visit from China’s future leader, who signed two trade and investment agreements with Ireland, was driven by the Asian country’s demand for new technologies thanks to its increasingly sophisticated population.

“They are hungry for technologies, things are changing so fast. Ireland is such a small country but we have lot of small and medium businesses with great technologies,” said Jo Cheng, head of analytics at Dublin-based Idiro Technologies, which she noted, had been approached by two Chinese companies in recent months for the first time.

“Ireland is the (European) headquarters of so many massive technology companies like Google, Facebook, eBay. There is a reason why they’re here,” said Cheng, a Chinese national living in Ireland.

Xi, whose trip began in the United States last week, arrived in Dublin Sunday from the west of Ireland, where he toured the picturesque Cliffs of Moher and a dairy farm.

Ireland’s national sports – Gaelic football and hurling – won an unlikely new audience when pictures of China’s vice president kicking a football were beamed to Beijing from Ireland.

“He showed some admirable skills for his first time kicking on what is … a very holy turf for us,” said Alan Milton, a spokesman at the Gaelic Athletic Association (GAA).

Xi was given a personal demonstration of both at the empty 80,000-seater Croke Park, Ireland’s largest stadium and the scene of a massacre of footballers and fans by British troops during its fight for independence almost a century ago.

His fascination with Ireland dates back to his first trip to Dublin in 2003 when he was a provincial party secretary, and he was introduced to the two sports by Ireland’s then-president Mary McAleese in Beijing two years ago.

“I recall my first visit to this country in 2003. At that time one Irish person I met said to me an Irish saying that is good things often come in small packages and that person said that is us, that is Ireland. We believe Ireland has so many good things to offer,” said Xi Sunday evening.

Ireland’s Prime Minister Enda Kenny, who will visit China next month with a trade delegation, added that the countries had a lot to offer each other, despite the differences in size.

“It is not simply a question of whether a country is large or small, east or west. Rather, it is a matter of knowing your strengths, and how you exercise them,” he said.

Xi, who visited the United States last week and moves on to Turkey Tuesday, began his Irish stay at a high tech zone near Shannon airport that inspired the building of a similar zone in Shenzhen, the pilot project of former leader Deng Xiaoping’s economic reforms.

He also pledged China’s continued support Monday for Europe, battling a widespread debt crisis, and Ireland, which is hoping to exit a bailout from the European Union and International Monetary Fund on schedule next year.

“The world economic recovery remains an uphill struggle. It is all the more the urgent for countries around the world to enhance mutual trust and co-operation to meet challenges together,” said Xi.

“China will continue in a responsible way within its capabilities to support the efforts of the EU, IMF and ECB (European Central Bank) to address European debt problems.”

IRISH CHARM

Beijing has followed with interest Ireland’s transformation from a developing farming economy to one that attracted international technology and drug companies, and is now showing first signs of rebounding from an economic crash.

Ireland hopes to make the most of Xi’s three-day visit to promote exports of anything from IT services to dairy products, as well as inward investment.

“The visit to Ireland by Vice President Xi is hugely significant in terms of Ireland’s export-led recovery. China is a priority market for Enterprise Ireland,” said Frank Ryan, the CEO of Enterprise Ireland Monday.

A deal to import pears from north-western China was sealed Monday for one Irish company that distributes fruit and vegetables to Ireland and other European markets.

“The growth potential (in China) is huge,” said Caroline Keeling, Managing Director at the company, Keelings. “(And) I think the Irish have a skill of getting on with other cultures.”

The head of Irish mobile technology firm ezetop, which recently signed a deal with China Unicom, added that Ireland’s low corporation tax rate environment as well as the availability of skills helped Ireland secure the prominent visit.

“The Vice President recognizes that Ireland is at a pivotal position in Europe, it is English-speaking, a very good corporate tax rate environment, and availability of skills and talent. Those factors mean it’s a great launch-pad for entering Europe. And also to expand further into the U.S.,” said ezetop chairman Mark Roden.

“He saw an opportunity for building strong relationships with Irish companies and let’s face it, we need them probably more than some of the English companies.”

(Reporting by Padraic Halpin and Lorraine Turner; editing by Philippa Fletcher)

Xi, whose trip began in the United States last week, arrived in Dublin Sunday from the west of Ireland, where he toured a dairy farm and the picturesque Cliffs of Moher.

He is due to attend an investment forum with some 300 companies Monday, and Ireland hopes to make the most of his three-day visit to promote exports of anything from IT services to dairy products, as well as inward investment.

“He showed some admirable skills for his first time kicking on what is … a very holy turf for us,” said Alan Milton, a spokesman at the Gaelic Athletic Association (GAA).

The vice-president’s fascination with Ireland dates back to his first trip to Dublin in 2003 when he was a provincial party secretary, and he was introduced to the two sports by Ireland’s then-president Mary McAleese in Beijing two years ago.

Xi was given a personal demonstration of both at the empty 80,000-seater Croke Park, Ireland’s largest stadium and the scene of a massacre of footballers and fans by British troops during its fight for independence almost a century ago.

Xi showed a keen interest in the players’ size and fitness as well as the sports’ finances, GAA president Christy Cooney told journalists.

Beijing has followed with interest Ireland’s transformation from a developing farming economy to one that attracted international technology and drug companies, and is now showing first signs of rebounding from an economic crash.

FARMING AND HIGH-TECH

“Ireland and China have much to offer each other in food and agriculture, in high technology research and in investment. We should make every effort to realise that potential,” Prime Minister Enda Kenny said in a speech welcoming Xi and his delegation to Dublin Castle for the evening, before signing two trade and investment agreements.

Xi began his visit at a high tech zone near Shannon airport that inspired the building of a similar zone in Shenzhen, the pilot project of former leader Deng Xiaoping’s economic reforms.

But Gaelic games, played exclusively by amateurs but often attracting larger crowds in Ireland than matches featuring millionaire professional soccer and rugby players, have proved a rather unlikelier export.

Gaelic football is similar to soccer but played with both hands and feet, while hurling and its female equivalent camogie, played on the same pitch, use a stick often flailed at head height to propel a small, hard ball toward goal.

Many gifted players affected by Ireland’s economic crisis have been forced to emigrate to find work and Gaelic clubs have flourished in cities from Stockholm to Sydney.

Emigrants have even used tournaments to develop business links, and Thailand’s finance minister was a keynote speaker at one recent Asian tournament.

In Beijing, where more Chinese girls than boys have taken to Gaelic sports, Colin Dixon, a finance professional who is also president of the city’s Gaelic association, hopes to have a few new local players next week.

“Although it’s very much an Irish game, we have players both male and female from Britain, China, America, France, Germany, Spain and Mauritius,” he told Reuters.

“I’m sure when people see Xi in Croke Park they’ll be asking about what this sport is, and we would certainly hope this will increase our presence in the Chinese community.”

(Reporting by Padraic Halpin and Lorraine Turner; Editing by Tim Pearce)

Xi, who chose Ireland as the only European stop of a trip that began in the United States last week, arrived in Dublin directly from the west of Ireland after touring a dairy farm and the picturesque Cliffs of Moher earlier in the day.

“He showed some admirable skills for his first time kicking on what is … a very holy turf for us,” said Alan Milton, a spokesman at the Gaelic Athletic Association (GAA).

The vice-president’s fascination with Ireland dates back to his first trip to Dublin in 2003 when he was a provincial party secretary, and he was introduced to the two sports by Ireland’s then-president Mary McAleese in Beijing two years ago.

Xi was given a personal demonstration of both at the empty 80,000-seater Croke Park, Ireland’s largest stadium and the scene of a massacre of footballers and fans by British troops during its fight for independence almost a century ago.

Xi showed a keen interest in the size and fitness levels of players as well as the sports’ finances, GAA president Christy Cooney told journalists.

Ireland hopes to make the most of Xi’s three-day visit to promote exports of anything from IT services to dairy products, as well as inward investment; Xi is due to attend an investment forum with some 300 companies on Monday.

Beijing also continues to follow Ireland’s transformation from a developing agricultural economy to one that attracted international technology and drug companies, and is now showing first signs of rebounding from an economic crash.

FARMING AND HIGH-TECH

“Ireland and China have much to offer each other in food and agriculture, in high technology research and in investment. We should make every effort to realize that potential,” Prime Minister Enda Kenny said in a speech welcoming Xi and his delegation to Dublin Castle for the evening. Two trade and investment agreements were due to be signed later.

Xi began his visit at a high tech zone near Shannon airport that inspired the building of a similar zone in Shenzhen, the pilot project of former leader Deng Xiaoping’s economic reforms.

But Gaelic games, played exclusively by amateurs but often attracting larger crowds in Ireland than matches featuring millionaire professional soccer and rugby players, have proved a rather unlikelier export.

Gaelic football is analogous to soccer but played with both hands and feet, while hurling and its female equivalent camogie, played on the same pitch, use a stick often flailed at head height to propel a small, hard ball towards goal.

Many gifted players affected by Ireland’s economic crisis have been forced to emigrate to find work.

But as a result Gaelic clubs have flourished in cities from Stockholm to Sydney, and emigrants have even used tournaments to develop business links. Thailand’s finance minister was a keynote speaker at one recent Asian tournament.

In Beijing, where more Chinese girls than boys have taken to Gaelic sports, Colin Dixon, a finance professional who is also president of the city’s Gaelic association, hopes to have a few new local players next week.

“Although it’s very much an Irish game, we have players both male and female from Britain, China, America, France, Germany, Spain and Mauritius,” he told Reuters.

“I’m sure when people see Xi in Croke Park they’ll be asking about what this sport is, and we would certainly hope this will increase our presence in the Chinese community.”

(Reporting by Padraic Halpin and Lorraine Turner; Editing by Kevin Liffey)

Europe’s leading containerboard and corrugated packaging
producer group sliced 358 million euros ($474.07 million) off
its 2.75 billion debt pile during 2011, and posted a 12 percent
rise in earnings.

“We’re reinstating that dividend as promised at the first
opportunity when … the business is strong enough and the
outlook good enough to be able to sustain dividends on a
progressive basis,” Smurfit Chief Executive Gary McGann told
Reuters in an interview following Wednesday’s results.

The group set its payout at 15 euros cents a share.

Smurfit cancelled its dividend in early 2009 as it headed
into a difficult economic environment while saddled with debt.

The group said on Wednesday it was seeking the consent of
its lenders to extend debt maturities.

Shares rose 7.6 percent on the news to 7.09 euros at 0926
GMT, reaching levels last seen in July 2011.

“While macro-economic risks remain … we expect to continue
delivering strong free cash flow through the cycle,” the company
said in a statement.

POSSIBLE UPGRADE

Dublin-based Smurfit said earnings before interest, tax,
depreciation and amortisation (EBITDA) rose 12 percent to 1.02
billion euros in 2011, in line with expectations.

Fourth-quarter EBITDA was 245 million euros against a
consensus of 235 million according to a poll of 13 analysts
supplied by the company.

“A better-than-expected performance on profits and cash-flow
facilitated a very attractive re-financing proposal which, we
believe, the market did not think could happen,” said Barry
Dixon at Davey Research.

“It is still too early to amend earnings forecasts, until
the success or otherwise of the latest containerboard price
increases can be assessed,” he added.

Moody’s said it had placed Smurfit’s ratings under review
for a possible upgrade.

McGann said higher input costs and recently-announced price
increases would lead to short-term margin compression, however
this would support better corrugated pricing in the medium term.

The company said in November it expected to meet market
expectations after a strong performance in Latin America during
the year, but some concerns remained over the group’s outlook
for Europe and a fall in paper prices.

The group, whose rivals include DS Smith, Stora
Enso and Mondi, slashed costs when demand
started falling during the last global downturn.

Consolidation in the sector is also widely expected, with DS
Smith agreeing to buy the recycled packaging operations
of Svenska Cellulosa Aktiebolaget (SCA) for 1.6
billion euros ($2 billion) last month.

“We should see ongoing growth in volumes, price and margins,
and the benefit of compounding those three, your bottom line
profit starts moving very quickly,” Chief Executive David
Ritchie told Reuters.

A focus on margins is helping UK housebuilders recover their
footing after several difficult years, supported by lower land
prices, cost-cutting and a shift in product mix from apartments
towards houses, which is lifting selling prices.

Smaller builders such as Bovis have also been able to adapt
more quickly to rocky trading conditions by retrenching out of
the north and refocusing on the more prosperous south, as well
as ramping up the number of sites it operates from.

This is enabling a profit recovery in the sector, despite
flat conditions in the housing market overall and uncertainty
around the general economic outlook which is keeping many
speculative buyers at home.

Ritchie noted that market activity would remain depressed,
but said the fortune of housebuilders was no-longer directly
tied to the level of housing transactions.

He added sales had held up in the autumn through to the end
of December, a trend which had continued in recent weeks,
echoing comments from larger peers Barratt Developments Plc
and Persimmon Plc.

“We’ve had two solid trading weeks in 2012 so far, and I
would expect the next few weeks to be very similar. People
appear not to be put off from buying a new home,” said Ritchie.

BLEAK PROSPECTS

The prospect for homebuyers in the UK however is more bleak,
with the number of first-time buyers plummetting to a record low
in 2011.

A lack of mortgage availability is constraining the market,
a situation which is not expected to change radically in the
short-to-mid term, despite government measures such as a
mortgage indemnity scheme, expected to be launched in the
Spring.

Bovis said it is confident of achieving analysts’ consensus
for full-year pretax profit of 31 million pounds ($47.4
million).

It expects to report overall completions up 8 percent to
2,045 homes in 2011 when it issues its full-year results at the
end of February, with private completions up 18 percent in the
year, and forward bookings rising by more than a third.

“Based on current market conditions … the group can
deliver significantly increased profit and, coupled with
improving efficiency of capital employed, a stronger return on
capital employed in 2012 and beyond,” said Ritchie.

Bovis said its average sale price rose 4.5 percent to
180,100 pounds.

Shares in Bovis were up 0.4 percent at 0905 GMT,
outperforming the UK midcap stock index which was down 0.03
percent.

“The acceleration of earnings in H211 and 2012 should offer
further support to the shares through Q112,” said Simon Brown at
Northland Capital.

European leaders agreed to draft a new treaty to tighten budget controls in the debt-laden euro zone last month, but while this represents significant progress it is not sufficient on its own, Kenny told a Thomson Reuters Newsmaker event in London.

Kenny’s warning follows comments by Italian Prime Minister Mario Monti on Wednesday that it was vital markets recognise its economic policy progress soon given Europe’s third-largest economy still face stubbornly high sovereign debt yields.

“Clearly we are not yet at a point where market confidence in the euro has been restored. We must ensure that more binding, durable and enforceable fiscal rules go hand-in-hand with funding certainty for countries pursuing sound and sustainable economic policies,” Kenny said in a speech.

“Beyond that, we absolutely must start creating the conditions and environment for a return to economic growth and job creation across the Union.”

Ireland has long been trying to twin unprecedented austerity with a return to the economic growth needed to make its debts sustainable, a balance now being tackled across Europe as leaders prepare to discuss how to boost growth and jobs at an EU summit later this month.

Despite success in cutting its budget deficit, slow growth and sky-high borrowing costs have put Ireland’s aim of exiting its EU/IMF bailout in 2013 in doubt, and Kenny said the trust his government has built up with its lenders gives Dublin better hope of winning the improvements to the deal it is seeking.

“(The trust) allows greater room for sensible evolution and enhancement of the programme to improve its prospects of success, to support a return to growth, and to restore market confidence in our public finances and banking system,” he said.

Kenny said he hoped the country could make a “tentative return” to bond markets by the end of next year, even if that just meant borrowing funds at yields of 6 percent, which many economists have said would be unsustainable in the long term.

“Even if we were to borrow at 6 percent, the situation would improve because of the confidence people would have in the country,” he said.

FRAGILE PROSPECTS

The IMF warned last month that the prospects of a successful conclusion to Ireland’s bailout were fragile and said Europe could help Dublin’s prospects by offering its lenders medium-term funding, help on deleveraging costs and possibly taking temporary equity stakes in them.

Kenny said that despite turmoil on global markets, Ireland made significant progress in deleveraging its banking system last year, selling 32 billion euros (27 billion pounds) worth of assets, or 46 percent of those required under the three-year plan.

The government is pushing for further concessions from its international lenders, but forcing holders of Irish sovereign debt to take a write-down, like the private-sector involvement (PSI) in Greece, remains off the table.

“It was decided – and that decision is final – that the PSI situation is unique to Greece and Greece alone,” he said, adding that he did not agree with European Central Bank policymaker Athanasios Orphanides’ call to abandon PSI in Greece.

Dublin is in technical discussions with European officials to try to refinance the 47 billion euros cost of shoring up nationalised Anglo Irish Bank, and Kenny said he was following up on a number of initiatives on how the euro zone’s rescue fund could be used to help Irish banks.

Cutting the burden of Ireland’s debt, which has quadrupled on the back of its financial crisis, would also help smooth the passage of a possible referendum this year on Europe’s fiscal compact.

Kenny reiterated on Thursday that the government would only be able to make a decision on whether a vote is necessary when the text of the proposed compact is finalised.

Kenny will meet Prime Minister David Cameron later on Thursday. The UK’s decision to opt out of Europe’s fiscal compact was a blow to Dublin, which like London opposes France’s plan for a financial transaction tax.

(Writing by Padraic Halpin and Conor Humphries; Editing by Hugh Lawson)

European leaders agreed to draft a new treaty to tighten
budget controls in the debt-laden euro zone last month, but
while this represents significant progress it is not sufficient
on its own, Kenny told a Thomson Reuters Newsmaker event in
London.

Kenny’s warning follows comments by Italian Prime Minister
Mario Monti on Wednesday that it was vital markets recognise its
economic policy progress soon given Europe’s third-largest
economy still face stubbornly high sovereign debt
yields.

“Clearly we are not yet at a point where market confidence
in the euro has been restored. We must ensure that more binding,
durable and enforceable fiscal rules go hand-in-hand with
funding certainty for countries pursuing sound and sustainable
economic policies,” Kenny said in a speech.

“Beyond that, we absolutely must start creating the
conditions and environment for a return to economic growth and
job creation across the Union.”

Ireland has long been trying to twin unprecedented austerity
with a return to the economic growth needed to make its debts
sustainable, a balance now being tackled across Europe as
leaders prepare to discuss how to boost growth and jobs at an EU
summit later this month.

Despite success in cutting its budget deficit, slow growth
and sky-high borrowing costs have put Ireland’s aim of exiting
its EU/IMF bailout in 2013 in doubt, and Kenny said the trust
his government has built up with its lenders gives Dublin better
hope of winning the improvements to the deal it is seeking.

“(The trust) allows greater room for sensible evolution and
enhancement of the programme to improve its prospects of
success, to support a return to growth, and to restore market
confidence in our public finances and banking system,” he said.

Kenny said he hoped the country could make a “tentative
return” to bond markets by the end of next year, even if that
just meant borrowing funds at yields of 6 percent, which many
economists have said would be unsustainable in the long term.

“Even if we were to borrow at 6 percent, the situation would
improve because of the confidence people would have in the
country,” he said.

FRAGILE PROSPECTS

The IMF warned last month that the prospects of a successful
conclusion to Ireland’s bailout were fragile and said Europe
could help Dublin’s prospects by offering its lenders
medium-term funding, help on deleveraging costs and possibly
taking temporary equity stakes in them.

Kenny said that despite turmoil on global markets, Ireland
made significant progress in deleveraging its banking system
last year, selling 32 billion euros ($40.6 billion) worth of
assets, or 46 percent of those required under the three-year
plan.

The government is pushing for further concessions from its
international lenders, but forcing holders of Irish sovereign
debt to take a write-down, like the private-sector involvement
(PSI) in Greece, remains off the table.

“It was decided – and that decision is final – that the PSI
situation is unique to Greece and Greece alone,” he said, adding
that he did not agree with European Central Bank policymaker
Athanasios Orphanides’ call to abandon PSI in Greece.

Dublin is in technical discussions with European officials
to try to refinance the 47 billion euros cost of shoring up
nationalised Anglo Irish Bank, and Kenny said he was following
up on a number of initiatives on how the euro zone’s rescue fund
could be used to help Irish banks.

Cutting the burden of Ireland’s debt, which has quadrupled
on the back of its financial crisis, would also help smooth the
passage of a possible referendum this year on Europe’s fiscal
compact.

Kenny reiterated on Thursday that the government would only
be able to make a decision on whether a vote is necessary when
the text of the proposed compact is finalised.

Kenny will meet British Prime Minister David Cameron later
on Thursday. The UK’s decision to opt out of Europe’s fiscal
compact was a blow to Dublin, which like London opposes France’s
plan for a financial transaction tax.

A focus on margins is helping UK housebuilders recover their
footing after several difficult years, supported by new and
cheaper land and a shift in product mix from apartments towards
houses, which is lifting average selling prices.

Barratt, one of the larger listed housebuilders, said in a
trading update it expected its group operating profit to rise by
40 percent to 61 million pounds ($93.7 million) for the six
months through December.

Barratt is due to release first-half results on in February.

Group revenue is expected to rise 8 percent year-on-year to
950 million pounds, albeit against weak comparative figures
hindered by bad weather last year.

“We’ve seen a strong first half with our strategy delivering
significant improvements in profitability,” Barratt’s group
finance director David Thomas told journalists.

This echoed comments from larger rival Persimmon,
which said on Monday it expected its full-year pretax profit to
rise by half, thanks to higher sales margins.

Barratt confirmed a good start to its financial year with a
rise in its operating margin from 5 percent last year to 6.4
percent and said it expected further improvements in the second
half.

Private forward sales jumped by nearly a third year-on-year
to 415.3 million pounds, and total forward sales rose 8 percent
to 698.1 million, leading the company to feel more confident in
its outlook despite the uncertain economic prospects.

The perspective for homebuyers in the UK is bleak, with the
number of first-time buyers plummetting to a record low in 2011,
despite prices dropping and a number of government measures such
as FirstBuy and a mortgage guarantee scheme.

“Clearly there is ongoing uncertainty in the UK housing
market as a result of economic concerns, however, we have a
strong forward sales position and we believe the implementation
of the new government-backed 95 pct mortgage indemnity scheme
will have a positive effect on the market,” said Thomas.

Completions in the six-month period rose to 5,198 units
from 4,832 in the same period last year. The average selling
price rose 3 percent to 181,000 pounds, with the positive
results helping lift the group’s shares by 3.4 percent at 0900
GMT.

“Driven in part by a greater exposure to London, Barratt is,
in our view, making solid progress in reshaping and
re-energising its business,” said Simon Brown at Northland
Capital Partners. “The first half shows a marked improvement on
last year’s comparables,” he added.

Britain is unlikely to shake off its housing hangover anytime soon, with prices and transactions on ice, as the country mourns its housing boom which inflated economic growth, prompting the government to vow to get Britain building again.

New government proposals, which include a mortgage indemnity scheme to support 100,000 new home loans, are tinkering around the edges and failing to address some of the complex issues the country is facing in terms of housing.

“It’s very hard to see that the kinds of measures proposed to date through the housing strategy (will) reboot the market,” said Peter Williams, chairman of housing consultancy Academetrics.

“The government policy review is obviously earnest and worthwhile but it is striking that one has a strategy without any clear aims and objectives or plan; it’s a series of measures,” he said.

Activity in the housing market is stagnant as economic uncertainty, the threat of a renewed recession and rising unemployment are cutting deep in terms of confidence, tipping consumer morale to its lowest level in almost three years.

Moreover a decimated mortgage market in the wake of the financial crisis has left first-time buyers hamstrung by lofty deposit requirements, and pressured banks show few signs of easing lending criteria as they repair their balance sheets and work to meet new regulations.

The number of first-time buyers in Britain fell 7 percent last year from 2010 according to mortgage lender Halifax, representing the lowest annual total since its records began in 1974.

Without the motor of those taking their first step on the housing ladder, transactions have fallen to record lows and fewer homes are now being built in the UK than at any time since the 1920s, leaving the country struggling to meet the needs of a growing population.

Prices in some areas such as the South East have fared better than many feared, propped up by low interest rates. A modest overall fall is expected this year but that could prove optimistic should the euro zone sovereign debt crisis worsen significantly, a Reuters poll of analysts found.

However, homeowners have still seen a fifth sliced off the value of their property since the height of the boom four years ago, compared with a third in the United States.

Some economists and politicians are not opposed to a slowly deflating market, after average house prices tripled during a property boom in the 10 years to 2007 and a property bubble that many denied even existed.

The Bank of England’s David Miles said recently that the UK housing market may never look the same again, transformed by the collapse of the mortgage market which experts say has set it apart from previous downturns. This is pushing the UK towards a lower rate of owner-occupation and bigger rental sector.

“In the longer run this is not likely to be a source of major net losses. To the extent that it offsets tax distortions and creates a more stable housing market, it will create some gains,” Miles said in a speech at the end of November.

In other parts of Europe where renting a home is seen as normal even by many on higher incomes, this may seem unproblematic, but the kick-back from a nation used to home ownership may pose risks to the UK government in the long term.

SETTLE DOWN

Housing is a bedrock of consumer wealth in Britain and some construction industry executives argue that a seismic shift in the UK housing market is unlikely, due to the nation’s history of home ownership, and a probable return to life of the mortgage sector via new entrants and increased competition.

However, a chief executive of a builder and developer in the London area said cuts to the government’s affordable homes budget as part of its austerity drive and constrained first-time buyers are creating unease.

“If I was responsible for the whole of the UK market, I would be nervous now about what we’re going to do about first-time buyers,” said the CEO.

In the North-East of England, opposite the council buildings in central Hartlepool, situated in a bleak 1960s concrete shopping centre, a 30-year old youth worker describes the frustrations of buying a first home with her partner.

“Not only are we going to be debt to the bank, we’re also in debt to our parents… we’re probably never going to afford to get married, and god forbid we ever decide to have a child,” said Jade Heppenstall.

With both sets of parents lending money to enable the couple to meet the high-deposit requirements, Heppenstall is one of the lucky few. Nonetheless, she is part of a growing generation that is questioning how a university education and nearly a decade of work can lead to so little.

“I’ve worked my arse off, (so) how the hell has this happened?” she said.

HOLY GRAIL

The Conservative-led government has proposed to reform planning laws to help unblock the flow of new homes being built, but has met fierce resistance from some core supporters who are reluctant to see new homes in the leafy areas in which many of them live.

It also prevented sales drying up altogether for homebuilders in the first-time buyer market with its equity loan scheme, First Buy.

But the lack of a government roadmap and support for the growth of the private rented sector – which is being used to meet housing demand – is sustaining the nation’s obsession with home ownership.

The government has pledged to reinvigorate Margaret Thatcher’s “right to buy” scheme of the 1980s which sold off many state-owned rental properties, and the lack of rights renters enjoy remains, especially compared to those in continental Europe.

“Much more is required to overcome the under-development of professionally managed, custom-built rented housing,” said Jennet Siebrits, head of residential research at CBRE.

Bringing in new money from institutional investors has long been mooted in the house building industry as a solution to the housing crisis, with pension funds in particular attracted to the steady rental yields, particularly from social housing.

The cash-strapped government confirmed plans at the end of last year to tap British pension funds to provide the bulk of up to 30 billion pounds of investment in 500 new infrastructure projects including housing.

“It’s a holy grail but no-one has yet worked out how you achieve it. These funds have a long list of worries, one is just the hassle of managing housing,” said Tony Dolphin, Senior Economist at the Institute of Public Policy Research.

The pressure on government from a dissatisfied youth and the social issues related to an undersupply of homes, particularly in the affordable home arena, will only grow.

Rental yields have soared 10 percent in the past two-three years, and local councils are facing mounting pressures to come up with social housing solutions.

“Tragically, housing is at the core of virtually every major issue we’re facing in the town,” said Jonathan Brash, a local councillor for the Labour Party in Hartlepool, famous for its shipbuilding and steel-making industries which declined after the Second World War.

“If you decide to squeeze the amount of money in young people’s pockets, at the same time as not really investing in any new build, and making it impossible for councils to bring empty properties back into use, the only direction is disaster for young people,” he said.

“Whether the government listens to any of that, I don’t know. There is no evidence so far,” he added.

(Reporting by Lorraine Turner; Editing by Toby Chopra)