Flagging housing market

House prices rose for the second month in a row in August, after three months of declines, but prices have been largely static since the beginning of the year, according to a leading housing market indicator.

Prices rose by 0.2 per cent after a 0.7 per cent increase in July, according to the Halifax house price index. Prices in August were 0.5 per cent lower than last December.

New homes data spell declining market – Sep-03UK house building recovery slows – Sep-04UK house prices on downward trend – Sep-02In depth: UK house prices – Jul-13Halifax said it expected the broadly flat trend to continue throughout the rest of the year.

Signs of contained house price pressures from the Halifax index are supported by the closely watched Nationwide index, which has shown only a 1.2 per cent rise since the end of last year and falling house prices in the past couple of months.

The damper house prices this year follow a rapid bounceback throughout much of last year from the declines seen during the worst of the recession.

After dropping by about 23 per cent during the recession, house prices have risen by almost 9 per cent, according to the Halifax measure. The recovery last year came amid reports of shortages of supply, as well as subsidies for first-time buyers of lower-priced properties.

But this year, constrained mortgage lending – which remains lodged at less than half its pre-crisis average – combined with tougher terms and higher deposits has left the housing market looking weak.

“The market is broadly stable with house price inflation having cooled since last year, when supply shortages helped to push up prices,” said Martin Ellis, economist at Halifax.

“The improved economy, strengthening labour market and low interest rates are all supporting housing demand. We expect that UK house prices will remain static overall in 2010.”

Category: Property News