Halifax: House prices to "tread water" for remainder of 2012

Halifax has reported little change in house prices for August and says that the underlying trend is that they continue to “tread water.”

Halifax reports that house prices fell by 0.4 per cent month-on-month in August, the second successive monthly fall which has effectively cancelled out the slight increases seen in May and June.

The Halifax said that falling inflation was likely to benefit the UK property market as people would have more disposable income, but predicted that there will be little change to house prices and mortgage approvals before 2013.

On a three monthly basis, house prices fell by 0.3 per cent in the three months to the end of August, a slightly worse reading than seen in July when house prices fell by 0.1 per cent on a quarterly basis.

The Halifax data contradicts a survey published last week by Nationwide that said house prices rose by 1.3 per cent. However, Nationwide says that on a quarterly basis house prices fell by 0.5 per cent, similar to Halifax's estimate of a 0.3 per cent drop over the same period.

Martin Ellis, Halifax housing economist, said: "Overall, there has been little change in house prices so far this year with the UK average price in August at a very similar level to the end of 2011.

“A gradual upward trend in spending power, aided by lower inflation, should help support housing demand in the coming months. Nonetheless, prices are likely to remain flat over the remainder of 2012 and into next year.”

In fact, the average UK house is valued at just 0.2 per cent more than it was in December 2011. The Halifax reports that the average house price is £160,256, almost exactly the same level as three years ago.

House prices hace fallen by around 20 per cent from their peak of £199,612 at the peak of the market exactly five years ago.

This reinforces the theory that low interest rates have helped to stop the housing market from crashing during a period when the rest of the economy has struggled.

Russell Quirk, director of estate agents, eMoov.co.uk, said: “The treading water cliche has been wheeled out once again, but in fairness to the Halifax that accurately sums up what the property market is doing: very little indeed.”

Halifax says that there was a seven per cent increase in mortgage approvals, following a 13 per cent fall last month. Overall, approvals were slightly down, by two per cent, in the three months to the end of July, compared to the same period last year. 

Howard Archer, Chief UK & European Economist at IHS Global Insight predicts that house prices will continue to fall.

He said: “We suspect that house prices will trend gradually lower over the latter months of 2012 and very possibly beyond in the face of limited activity, low and fragile consumer confidence, and muted earnings growth. Specifically, we expect house prices to fall by at least 3% from current levels.”

Free guide to peer-to-peer lending