House Prices Fell in March says Halifax

House prices fell by 1.9% in March, but the annual rate of decline slowed slightly, figures from Halifax showed today.
The monthly figures run counter to those published yesterday by rival lender Nationwide, which showed a 0.9% rise in house prices over the month. This is not the first time the indices have disagreed – in January, Halifax reported a price rise while Nationwide said prices had dropped, and such volatility is common when transaction levels are so low. The three-monthly figures from both lenders, which are a better reflection of the state of the market, both show price falls.
David Smith, senior partner at Dreweatt Neate estate agents, said the figures were proof that Nationwide’s figures should not be viewed as the beginning of an upturn.
“There is an inherent volatility to house prices right now and because of this, a sideways-moving market, with the odd spike up or down, remains the most likely course for the rest of 2009,” he said.
Howard Archer, chief UK economist at IHS Global Insight, said the contrasting data showed how important it was to look at all the surveys available rather than focusing on just one.
“House price data can be very volatile from month to month, and also between surveys,” he added.
The March decline reported by Halifax, which took the average price of a UK home down to £157,326, was smaller than the 2.3% fall recorded in February. The annual rate of deflation as shown by the lender’s measure, which compares the last three months’ average with the same period last year, also reduced, from 17.7% to 17.5%.
Prices are now more than £33,000 lower than in March last year, according to the Halifax.
Martin Ellis, Halifax’s housing economist, said that although the number of sales completed in England and Wales halved between 2007 and 2008, there were some “very tentative” signs that activity was beginning to stabilise.
However, he said house prices were likely to continue to fall. “Conditions in the housing market are likely to be tough during the remainder of 2009 despite the improvements in affordability.
“Increasing unemployment, low consumer confidence and the constraining effects of the continuing dislocation of the financial markets on the availability of mortgage finance are all likely to exert downward pressure on the market over the coming months.”
Stalling market
The housing market has stalled over the past year as buyers have been deterred by falling prices and a squeeze on credit, which has made it much harder to raise a mortgage.
There are signs this could get easier over the coming months, with the Bank of England reporting that lenders expect to be able to offer more loans to households.
However, it looks likely that credit will be targeted at buyers with at least 25% to put down as a deposit, which by Halifax’s measure means a lump sum of just under £40,000.
According to Halifax, those who can raise that kind of sum can take advantage of the lowest house price-to-earnings ratio in more than six years, with homes now costing 4.34 average earnings as opposed to 5.85 when the market was at its peak in July 2007.
The cost of servicing mortgage debt has also fallen, with interest rates slashed to 0.5%. Monthly repayments accounted for 22.6% of average income before tax in February, compared to a peak of 26.9% in October when the Bank base rate stood at 5%.