House prices fight back with 1.3% December rise
The latest Halifax house price index has surprised property experts by showing a 1.3% increase in the cost of the average UK home, in December.
The rise, which can be seen as further evidence of a turbulent market, brings the price of the average house to £197,000, a £2,500 increase on November’s average and £11,850 more than in December 2006, when the average price stood at £186,200.
House prices fell for three consecutive months prior to December and last month’s rise puts the annual level of house price inflation in 2007 at 5.2%.
This makes 2007 only the second year since 2001 that house prices have risen annually by less than the index’s 8% long-term average.
Turning to the Halifax three-month index, which is a more reliable indicator of price trends, house prices fell by 0.8% in the final quarter of last year.
The decline represented the largest quarterly fall since mid-1995 and the first quarterly drop since mid-2000.
According to Martin Ellis, Halifax chief economist, “Higher mortgage repayments in response to the series of five interest rate increases between August 2006 and July 2007, and falling real earnings have put pressure on households’ income, resulting in a slowdown in both house price growth and activity in recent months.”
Halifax expects house prices to be flat during 2008 and regards the mix of monthly rises and falls as typical of a subdued market.
The consensus of property analysts is that prices peaked around Easter 2007 and that 2008 will see transactions fall, as confidence in the housing market falters and mortgage lenders struggle with the credit squeeze.
The figures from Halifax are at odds with Nationwide’s recently released house price index, which shows a 0.5% decrease in the average house price during December.