CLG: House price growth hits 23 month low

New figures from the Department for Communities and Local Government (CLG) reveal the annual house price inflation has fallen to a 23-month low.

The latest house price index from the CLG finds annual growth stood at 4.9 per cent in April.

This is a marked decrease from the level of from 5.2 per cent recorded in March and a peak of 12.3 per cent in July 2007.

However, despite the long term decline, house prices rose by 0.7 per cent month-on-month in April, which was less than the one per cent increase in April 2007.

The CLG figures also remain strongly ahead of other indicators.

The Halifax is now reporting prices fell by an average of 3.8 per cent over the last year, slightly behind the 4.4 per cent falls recorded by the Nationwide.

The generally negative figures have forced analysts to lower their forecasts as to which direction the industry is likely to head in the coming months.

Commenting on the wider picture in the market, analyst Howard Archer of Global Insight said: "Against this backdrop, Global Insight expects house prices to fall by 12 per cent in both 2008 and 2009.

"Furthermore, we see significant downside risks to this forecast, particularly if the Bank of England does end up raising interest rates."

The Bank's monetary policy committee (MPC) left rates on hold in May, at five per cent, in an attempt to counter inflation.

"While we still expect the eventual next move in interest rates to be down, there is undeniably a growing risk that inflationary pressures could lead the Bank of England to raise them instead," continued Mr Archer.

"At the very least, any further cuts in interest rates now seems a long way off, which is not good news for the housing market."

Chris O'Toole