Halifax: House prices down 6.1%

Thursday, 10 July 2008 12:00 AM

The latest house price index from the Halifax finds house prices have fallen by 6.1 per cent over the year to June.

This follows a two per cent fall over the last month alone, according to the study from the UK's largest mortgage lender.

However, this is a slower pace of decline than the 2.5 per cent drop seen in May.

House prices are now at the same level recorded in August 2006, yet they remain slightly higher (two per cent) than two years' ago, more than ten per cent higher than in June 2005 and almost 40 per cent above that in June 2003.

According to Halifax, the average price of a property is now £180,344.

Despite recent falls, however, there is presently no need for concern argues Halifax.

Prices have increased 196 per cent since the trough of the 1990s slump - increasing for 48 consecutive quarters since 1995.

"A strong labour market, low interest rates and a shortage of new houses underpin housing valuations," argues Halifax chief economist, Martin Ellis.

"Our research shows that the labour market is the key driver of the housing market. Employment is at a record high."

A record 29.55 million people are presently in employment, finds the Office for National Statistics (ONS). Total employment increased by 76,000 over the three months to April, compared with the previous quarter and by 446,000 over the past year.

Despite this prices are still falling, prompted by a variety of reasons.

Spending power is presently under pressure, affordability difficulties abound due to the rapid rise in house prices in the last few years and the decline in credit availability resulting from the crisis in the financial markets is also taking a toll.

Coupled to this there has been a slight fall in real earnings over the past year.

Average earnings rose by 3.8 per cent in the year to April compared to a 4.2 per cent increase in the headline rate of retail price inflation over the same period.

Significant increases in both fuel (12 per cent) and food prices (eight per cent) over the past year have helped to reduce the discretionary income available to households to fund house purchase.

Halifax presently expects prices to fall by nine per cent by the end of the year.

However, modest falls may be welcomed by some.

"Contrary to a lot of the negative headlines, the majority of today's movers would rather see house prices fall than rise over the short term. Over the last eight years, house prices have increased by more than 120 per cent," said Keith McNeilly, co-founder of moveme.com.

"This level of growth was never going to be sustainable over the long term and as a result, the recent fall in house prices is being welcomed, particularly by those looking to step onto or move up the housing ladder."

A poll recently carried out by moveme finds 39 per cent of movers would prefer to see house prices fall in the immediate future, with a further 48 per cent hoping to see prices stabilise.

Chris O'Toole

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