House prices rise by 1.9% in January

Thursday, 5 February 2009 10:39 AM

By Sarah Garrod

House prices in January rose by 1.9 per cent according to the Halifax house price index released today.

The Halifax also said housing market activity may be stabilising and interest rate cuts have helped to reduce mortgage payments and improve affordability.

However, house prices in general are still falling, and the Halifax warns not to attribute too much weight to the rise, as house prices in general will rise and fall on a month by month basis.

Although January's rise reversed December's 1.6 per cent fall, prices in the three months to January compared to the previous three months were 5.1 per cent lower. Annually, house prices in January were 17.2 per cent lower than 2008.

Martin Ellis, housing economist at Halifax, said: "It is always important not to place too much weight on any one month's figures. Historically, house prices have not moved in the same direction month after month even during a pronounced downturn.

"For example, prices fell for seven successive months in 1989 but subsequently increased in three of the first ten months in 1990 even though the overall trend in prices was downwards.

"There are some very early signs that market activity may be stabilising, albeit at quite a low level."

He added: "Nonetheless, continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to mean that 2009 will be a difficult year for the housing market."

The Halifax data compare to figures from Nationwide showing a 1.3 per cent fall in house prices in January.

The number of industry-wide mortgages approved to finance house purchase increased by 15 per cent in December, to a seasonally adjusted 31,000 from a record low of 27,000 in November.

Approvals were still at a considerably low level, at 58 per cent lower than in December 2007.

David Smith, senior partner at Dreweatt Neate estate agents, said: "This is certainly a surprise but it is consistent with what we are seeing on the ground. Interest in the market is already much stronger than in 2008 and enquiries more serious."

Daniel Lee, CEO, of property search engine Globrix, added: "Traffic on our website last month was more than double that of December 2008 and the number of searches increased by 71 per cent, with most people searching at the bottom end of the price scale. Crucially, this suggests the first-time buyer is starting to look again."

But Howard Archer, chief UK and European economist for Global Insight, disagreed.

He said: "The very unexpected spike up in house prices in January reported by the Halifax does not fundamentally change our belief that further significant falls are highly likely in 2009.

"House prices can be very volatile on a month-to-month basis, and it is significant that January's rise on the Halifax measure followed particularly sharp falls through the fourth quarter of 2008.

"Consequently, we would certainly want to see more widespread and sustained signs of revival before changing our view of the housing market."

The Halifax house price index also showed that the average property price for January was £163,966, compared to £196,244 in January 2008.

Dr Archer added: "While there are some indications from the latest mortgage data and surveys that housing market activity may be bottoming out, this is at an exceptionally low level and there continue to be a powerful set of negative factors that seem highly likely to depress activity and prices for some time to come.

"Consequently, for now at least, we are not changing our forecast that house prices will fall by a further 15 per cent on the Halifax measure in 2009. A reduced fall of five per cent in house prices is expected in the first half of 2010, taking them down to a low of £129,895, which would be 35 per cent below their August 2007 peak.

"House prices are then seen flattening out in the latter months of 2010."

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