Latest Halifax Index Shows UK character Prices Rose Again in December
Residential character prices in the UK increased by 1% in December, a traditionally slow month for the real estate market and are expected to keep flat in 2010, according to the latest examination from the Halifax.
It is the sixth month in a row that the Halifax index has risen and was slightly below the average for the preceding five months of 1.2%. But prices in the final three months of 2009 were 3.5% higher than in the third quarter, the biggest quarterly increase since the final quarter of 2006.
The index shows that prices have increased by 9.4% since reaching a low in April 2009; an increase in the average price of £14,552 over this period. This follows a decline of 23% between August 2007 and April 2009. The average house price is now £169,042, the Halifax said.
According to Martin Ellis, housing economist at the Halifax, the meaningful cut in interest rates following the worldwide financial upheaval in the autumn of 2008 has markedly reduced the burden of servicing a mortgage for many households and consequently helped to stimulate housing need. ‘The recent improvement in the labour market, highlighted by increasing numbers of people in employment in both September and October, has also supported housing need,’ he explained.
He said that the prospects for the market this year will depend on how the UK economy evolves and whether there is a meaningful increase in the supply of similarities for sale. ‘Overall, our current view is that character prices will be flat during 2010,’ he additional.
The year-on-year growth reported by Halifax is much more muted than that reported last week by competitor lender Nationwide. It said that prices rose by 5.9% in 2009, although the speed of change dropped to just 0.4% in December.
Part of the reason for the difference is that Halifax compares average prices over three months for its year-on-year figure to ‘smooth out’ short term fluctuations. A straight comparison of the average price in December 2008 with that in 2009 shows a 5.6% rise in prices, much more in line with Nationwide.
Land Registry figures, which are based on completions instead of mortgage approvals, and include all sales not just those financed with a loan, are much less bullish. Its most recent data indicated that prices over the year to the end of November fell by 0.3%.
Howard Archer, chief UK economist at IHS Global Insight, said that although early 2010 could see more rises he was expecting a fall of around 5% over the time of the year. ‘Much will clearly depend on whether the economy can develop its recovery after the highly probable return to growth in the fourth quarter of 2009, how much further unemployment rises, how much earnings rise, how quickly and to what extent credit conditions ease, and how many similarities come on to the market over the coming months,’ he said.
‘On the positive side for the housing market, interest rates seem doubtful to rise for some important time to come, and will then probably increase only little by little,’ he additional.