House price inflation falls again despite small December rise
UK house prices unexpectedly rose by 1.3% in December according to the latest house price index released by Halifax.
However, the news follows three consecutive falls during late 2007, with prices in the fourth quarter as much as 0.8% lower than the previous quarter as a result.
Annual growth slowed to 5.2% in December, down from 6.2% in November and the 11.4% recorded in August – making 2007 only the second year since 2001 when prices have risen by less than the long-term average of 8%.
According to Halifax prices increased £11,759 over the year to £197,039.
“House prices increased by 1.3% in December, reversing some of the declines recorded in the preceding three months,” said Martin Ellis, chief economist at Halifax.
“This mixed pattern of monthly price rises and falls is a typical characteristic of a subdued market.”
The longer-term slowdown can be attributed to increases in interest rates during 2006/07.
“Higher mortgage repayments in response to the series of five interest rate increases between August 2006 and July 2007 and falling real earnings have put pressure on households’ income, resulting in a slowdown in both house price growth and activity in recent months,” explained Mr Ellis.
But he added that sound economic fundamentals reinforced by high employment, a shortage of supply and falling interest rates would support house prices during 2008.
The Halifax is predicting that house prices will be flat during 2008, but added that this should be seen in the context of rises of 182% during the past 10 years.