Fall in house prices adds to fears of market slide

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The Independent Online
FEARS OF a downward slide in the housing market were reinforced yesterday by fresh data showing a fall in house prices for a second successive month.

The average house price fell in December from pounds 73,231 to pounds 73,124 - 0.1 per cent - according to the Halifax monthly house price index. This followed a November fall of 0.7 per cent.

House price inflation has reached its lowest level since 1997, with prices rising by just 4.5 per cent in the year to December. Last summer prices were rising by 7 per cent.

The fall led economists to predict a "gently simmering" market over 1999. Prices are expected to slip in the first half but rebound in the second when buyers start to feel the benefit of lower interest rates.

Kieran Barr, a housing specialist at Deutsche Bank, said: "The housing market almost dried up at the end of last year because of deteriorating international conditions and lower consumer confidence.

"Although the consumer is not feeling under the cosh, he's still reading about recession. And we expect to see unemployment go up. What will be key is how things shape up in the first quarter of this year."

The price fall came despite a 2.5 per cent rise in mortgage lending in November. Lenders said this was due to existing homeowners switching to cheaper mortgage deals.

Halifax said there was still an upward trend in house prices over the year and housing was still at historically affordable levels compared to earnings. Halifax forecasts a 4 per cent rise in prices in 1999.

Fenula Early, economist at the Council of Mortgage Lenders, said: "If you look at the overall economic environment there is caution in the market, but I wouldn't say [the December price fall] is a sign of a crash."

Economists are now predicting that base rates could fall to 4.5 per cent this year, allowing variable mortgage rates to fall to 5.5 per cent.