Falling house prices expected to stabilise later this yearMake Text Bigger
The Halifax House Price Index shows that house prices are continuing to fall slowly but signs of “moderate improvement” in the economy suggest property values could stabilise later this year.
House sales remain subdued
House sales have remained subdued with 279,000 properties being sold in the first four months of 2011, which is a 5% decrease from the same period last year, according to the latest figures from the HMRC. The average UK house price also fell to £160,519 in May, 1.4% lower than in December 2010, on a seasonally adjusted basis.
Martin Ellis, Halifax housing economist, said,
“House prices continue to drift modestly downwards as measured by the underlying trend. Prices in the three months to May were 1.2% lower than in the previous three months; unchanged from April.”
“Low earnings growth, higher taxes and relatively high inflation are all putting pressure on household finances.”
“Confidence is also weak as a result of uncertainty about the economic and employment outlook. These factors are probably constraining housing demand and applying some downward pressure on prices.”
Signs of improvement
Despite the current situation, there have been some tentative signs of improvement, with industry-wide mortgage approvals, in the three months from February to April, increasing by 2% in the preceding three months on a seasonally adjusted basis, according to the latest Bank of England figures.
There has also been a modest improvement in the balance between supply and demand of properties, with the ratio of house sales to the stock of unsold properties on surveyors’ books edging up for a third successive month in April, according to the latest RICS monthly survey. Evidence of a slight tightening in market conditions also suggests that there may be an improvement in the house price trend over the coming months.
According to the ONS, GDP increased by 0.5% between the final quarter of 2010 and the first quarter of 2011, offsetting a similar sized decline in the previous quarter. The combination of a “moderate improvement” in the economy and continuing low interest rates is expected to support housing demand in the coming months. Mark Ellis said, “This should prevent a further marked fall in prices and help to stabilise property values later in the year.”
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