House price growth slowing, survey shows

House prices rose for the seventh month in a row during January but the rate at which they are increasing slowed, figures showed today.

The average cost of a UK home climbed by 0.6 per cent during the month to £169,777, Halifax said - 9.9 per cent higher than when prices hit their trough in April last year.

But the increase was the lowest in the past six months, when monthly gains have averaged 1.1 per cent, building on previous evidence that the recent strong recovery may be running out of steam.

Figures released by the Bank of England earlier this week showed that the number of mortgages approved for house purchase fell in December for the first time in 13 months.

Property intelligence group Hometrack also reported a drop in both buyers and sellers in January, while it said the number of sales agreed had also fallen during the month.

The data prompted economists to speculate that the recent recovery in activity levels in the market may be easing.

Martin Ellis, Halifax housing economist, said: "The marked reduction in interest rates over the past 15 months has, from a low base, boosted housing demand from those with a sufficient deposit to enter the market.

"Increased demand has combined with a low supply of properties available for sale to push up prices.

"There are some signs that more people are putting their homes on the market. A further increase in the supply of property is possible over the coming months, which would help to curb upward pressure on prices."

He said overall he expected house prices to be flat in 2010.

Halifax said house prices were now 3.6 per cent higher than they were 12 months ago - based on average prices in the past three months compared with the same period a year earlier.

This was the biggest annual increase since February 2008, and represented a significant turnaround from January last year, when property prices were 17.2 per cent lower than they had been 12 months earlier.

The Halifax figures contrast with ones reported by Nationwide for the same month, which showed a surprise 1.2 per cent jump in prices in January, with annual house price growth rising to 8.6 per cent.

But the group cautioned against reading too much into one month's figures, saying the three-month-on-three-month change, generally seen as a smoother indicator of market trends, had actually dipped slightly to 2.1 per cent in January.

Howard Archer, chief UK and European Economist at IHS Global Insight, said: "There are hints in the latest Halifax data that the upward march in house prices since early 2009 could be starting to lose some legs.

"While the Nationwide reported a larger increase in house prices in January itself, its survey had previously seen some signs of slowing momentum late in 2009.

"We believe that a modest relapse in house prices is likely at some point in 2010 and they may well be essentially flat over the year as a whole."