Halifax: House prices down 1.3% in April

UK house prices fell 1.3 per cent in April.

Data from Halifax show annual house price growth fell into the red at 0.9 per cent.

This follows a sharp 2.5 per cent fall during March, and a 0.4 per cent dip in February.

This is the first annual fall for over twelve years, and follows research released earlier this week by Nationwide, which finds annual prices were down one per cent in April.

"Price falls should be viewed in the context of the substantial price rises over recent years," said Halifax chief economist, Martin Ellis.

"UK prices nearly doubled 190 per cent over the ten years to August 2007. A growing economy, high employment levels, low interest rates and a shortage of new homes underpin housing valuations."

Halifax argues the decline in prices is driven by a squeeze on spending power and the rapid rise in house prices in the last few years.

These factors have curbed housing demand. The rise in interest rates between August 2006 and July 2007 has increased average mortgage costs.

Ahead of the news Halifax had taken a decision to downgrade its forecast for 2008, and now expects "modest single-digit fall" over the course of the year.

However, some areas of the country, such as Scotland, are likely to record modest price rises while other parts (e.g. Wales and West Midlands) are expected to see falls above the national average.

The Bank of England found this week transaction levels are also slowing – a clear sign of a depressed market – with just 64,000 mortgages granted for home purchases in March, the lowest level since records began.

This is also part of a longer trend.

There were 1.17 million house sales in England and Wales in 2007 according to Halifax, and an average of 1.16 million in the last three years (2005-2007).

This is nearly a third lower than in 1988 when there were an estimated 1.7 million transactions.

The number of first-time buyers has also fallen sharply in recent years.

An estimated 300,000 first-time buyers entered the market in 2007, the lowest since 1980. This compares with an estimated 900,000 at the peak in 1988.

In addition, analyst Howard Archer, chief economist of Global Insight, also attributes the fall in prices to the increased constraints on lending, with higher deposits required and less attractive interest rates available.

"Despite the Bank of England's special liquidity scheme, there are currently few signs that credit conditions are loosening significantly," said Mr Archer.

"Consequently, funds for mortgage lending seem likely to remain limited for some time to come while market interest rates are still high."

Chris O'Toole