Halifax: House price boom over

Wednesday, 5 September 2007 12:00 AM

Average house prices in the UK increased by 0.4 per cent during August, according to research released today by the Halifax.

The figure has been below 0.5 per cent in three of the previous four months, suggesting the house price boom may have peaked.

The three month increase was 1.6 per cent in August, down from 4.5 per cent in March, illustrating an underlying downward trend.

While the annual rate edged up to 11.4 per cent, from 11.2 per cent in July, it is expected to fall over the coming months as substantial gains last summer and autumn are removed from the equation.

"House prices increased by 0.4 per cent in August. This is the third month in the last four that house prices have risen by less than 0.5 per cent," commented Martin Ellis, chief economist at the Halifax.

"Whilst the market remains robust, this provides further evidence that house price inflation has slowed since the beginning of the year."

Two key causes for the trend are identified by the Halifax.

Negative real earnings growth has been recorded during 2007, with average earnings up 3.3 per cent, compared to a 4.4 per cent increase in the retail price index.

There have also been five interest rate increases in the previous twelve months, increasing mortgage rates and making property finance increasingly unaffordable.

"The downward trend in house price growth is expected to continue over the remainder of 2007 as the five interest rate rises since last summer have an increasing impact on household spending and housing demand.

"Sound economic fundamentals, high levels of employment and a shortage in the number of properties available for sale will, however, continue to support house prices," concluded Mr Ellis.

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