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Halifax: House prices down 1.1% in November

Wednesday, 5 December 2007 12:00 AM

Further evidence of a slowing housing market in the UK was revealed today, with the Halifax reporting average house prices were down 1.1 per cent in November.

This is the third consecutive monthly fall, following a 0.5 per cent dip in October, and the largest fall since December 2006.

Annual house price growth has now fallen to 6.3 per cent as a result, down from 8.9 per cent in October.

The average house price across the UK now stands at £194,895.

"The housing market has slowed in recent months as the increase in interest rates between July 2006 and July 2007 has taken effect," said Halifax chief economist, Martin Ellis.

"Higher mortgage repayments and falling real earnings have put pressure on households' income, resulting in a slowdown in both house price growth and activity."

The continuing fallout from the credit crunch is also partially to blame, making it more difficult for borrowers to secure funds to purchase property.

However, strong market fundamentals indicate the downturn in prices is a correction, rather than a crash.

House building has displayed a chronic inability to meet demand, thus creating a shortage of supply and bolstering prices.

Furthermore, the wider economy is also strong.

The UK's gross domestic product (GDP) increased by 0.7 per cent between quarter two and quarter three of 2007.

Economic growth has now continued unabated for 61 quarters in succession, according to the Office for National Statistics (ONS) - the longest period of growth ever recorded.

"The UK economy is in sound shape. Strong market fundamentals, a structural housing supply shortage and pent-up demand from a large number of potential first-time buyers will support house prices, preventing a sustained and significant fall," added Mr Ellis.

However, this optimistic review was not shared by all in the industry.

"Evidence is currently coming thick and fast that house prices are now cooling markedly in the face of slowing activity, increased affordability pressures and tightening lending practices," said Howard Archer, chief economist for Global Insight.

"Affordability continues to be pressurised by higher interest rates, elevated house prices and modest real disposable income growth. At the same time, the credit crunch and subprime mortgage concerns mean lenders are becoming much more careful about who they lend to, and on what terms."

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