Halifax: House prices up 1.3%

Tuesday, 8 January 2008 12:00 AM

The average house price in the UK increased by some 1.3 per cent during December, according to the latest house price index released by Halifax.

However, the news follows three consecutive falls during late 2007, with prices in quarter four 0.8 per cent below those recorded in quarter three.

Annual average house price inflation stood at 5.8 per cent during December, making 2007 only the second year since 2001 when prices have risen by less than the long-term average of eight per cent.

According to Halifax prices increased £11,759 over the year to £197,039.

"House prices increased by 1.3 per cent in December, reversing some of the declines recorded in the preceding three months," said Halifax chief economist Martin Ellis.

"This mixed pattern of monthly price rises and falls is a typical characteristic of a subdued market."

The longer-term slowdown can be attributed to increases in interest rates during 2006/07.

"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," explained Mr Ellis.

However, the Halifax moved to allay fears of dramatic falls in the near future.

Interest rates have begun to fall, following a 0.25 per cent cut in December, coupled to sound economic growth, - with the UK economy now in its 65th successive quarter of GDP growth.

The number of people in employment also increased by 114,000 during the three months to October compared with the previous quarter.

Yet, this is not the beginning of a recovery, argues Howard Archer, chief economist of analysts Global Insight.

"Housing market data can be highly volatile from month-to-month and survey-to-survey. Consequently, it is important not to read too much into one release.

"While the 1.3 per cent rise in house prices reported by the Halifax is undeniably a surprise, it is likely to be largely a correction after the particularly marked overall fall in prices through the previous three months," said Mr Archer.

"The overall evidence still clearly points to the housing market ending 2007 under mounting pressure from increased affordability pressures and tightening lending practices," he concluded.

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