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Halifax: housing market strengthens |
| Friday, 4th November 2005 |
While house prices were unchanged in October, the annual rate of increase edged up to a five-month high, Halifax said this morning, in further evidence of a stabilisng property market. |
The pattern of price movements during recent months shows that the market has strengthened, but the static level of prices in October suggests that we are not poised for another sustained period of sharply rising property values, according to the mortgage lender.
On an annual basis, house prices were up 3.9%, significantly below the 18.5% recorded in October 2004.
This year's slowdown in the pace of UK economic growth and the ongoing historically high level of house prices relative to average earnings are expected to curb the recent improvement in housing demand and prevent a marked pick-up in prices.
Martin Ellis, chief economist at Halifax, said: "Continuing economic growth, the high level of employment and a boost to household sentiment regarding the future direction of interest rates following August's base rate cut are all supporting housing demand.
"This year's slowdown in the pace of UK economic growth and the ongoing historically high level of house prices relative to average earnings are, however, expected to curb the recent improvement in housing demand and prevent a marked pick-up in prices.
"Sustained economic growth, high levels of employment and healthy earnings growth are all supporting housing demand," he added.
Capital Economics said it was possible that October's house price figure could be a sign that the upturn in housing market activity generated by Augustâs interest rate cut is beginning to run out of steam, but that it is too early to draw firm conclusions.
The think tank said that given that the economy is still operating at sub-trend levels, consumers are cutting back on their spending and unsecured borrowing and that affordability in the housing market remains stretched.
It said it would not be surprised to see both activity levels and house prices drop back from recent levels over the next few months.
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