Residential properties in UK increase in prices in December
Residential property prices in the UK increased by 1% in December, a traditionally slow month for the real estate market and are expected to remain flat in 2010, according to the latest analysis from the Halifax.
It is the sixth month in a row that the Halifax index has risen and was slightly below the average for the preceding five months of 1.2%. But prices in the final three months of 2009 were 3.5% higher than in the third quarter, the biggest quarterly increase since the final quarter of 2006.
The index shows that prices have increased by 9.4% since reaching a low in April 2009; an increase in the average price of £14,552 over this period. This follows a decline of 23% between August 2007 and April 2009. The average house price is now £169,042, the Halifax said.
According to Martin Ellis, housing economist at the Halifax, the significant cut in interest rates following the worldwide financial upheaval in the autumn of 2008 has markedly reduced the burden of servicing a mortgage for many households and thus helped to stimulate housing demand. ‘The recent improvement in the labour market, highlighted by increasing numbers of people in employment in both September and October, has also supported housing demand,’ he explained.
He said that the prospects for the market this year will depend on how the UK economy evolves and whether there is a significant increase in the supply of properties for sale. ‘Overall, our current view is that property prices will be flat during 2010,’ he added.
The year-on-year growth reported by Halifax is much more muted than that reported last week by rival lender Nationwide. It said that prices rose by 5.9% in 2009, although the pace of change dropped to just 0.4% in December.
Part of the reason for the difference is that Halifax compares average prices over three months for its year-on-year figure to ‘smooth out’ short term fluctuations. A straight comparison of the average price in December 2008 with that in 2009 shows a 5.6% rise in prices, much more in line with Nationwide.
Land Registry figures, which are based on completions rather than mortgage approvals, and include all sales not just those financed with a loan, are much less bullish. Its most recent data indicated that prices over the year to the end of November fell by 0.3%.
Howard Archer, chief UK economist at IHS Global Insight, said that although early 2010 could see more rises he was expecting a fall of around 5% over the course of the year. ‘Much will clearly depend on whether the economy can develop its recovery after the highly probable return to growth in the fourth quarter of 2009, how much further unemployment rises, how much earnings rise, how quickly and to what extent credit conditions ease, and how many properties come on to the market over the coming months,’ he said.
‘On the positive side for the housing market, interest rates seem unlikely to rise for some considerable time to come, and will then probably increase only gradually,’ he added.