Forecast of recovery in housing market boosted by Halifax data

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The Independent Online

Housing analysts' tentative forecasts of recovery for the housing market received fresh backing yesterday from a survey by Halifax Building Society, showing house prices rose 0.3 per cent in December.

This latest monthly increase, the fifth in a row, still means the cost of a home is 1.4 per cent lower than in December last year.

But the Halifax yesterday claimed the figures confirmed its view that prices have now stabilised.

Despite the house price rise, separate statistics from the British Bankers' Association showing that the amount committed by large banks to would- be borrowers dropped by 8 per cent, to pounds 1.55bn in November.

The number of lending approvals by banks also suffered a sharp 10 per cent drop in November, down to 30,000 from 33,000 the previous month.

However, the seasonally adjusted figures for net lending by large banks - new home purchases rather than re-mortgages - still grew from pounds 616m in October to pounds 677 the following month.

The Council for Mortgage Lenders said the fall in approvals, which cut the banks' share for home loans from 41 per cent of the market in October to 33 per cent the following month may have been caused by the mortgage price war which began in September.

Although the cost-cutting was sparked by Abbey National, now a bank, most large building societies responded to the challenge within hours rather than days, as high street banks did.

As a result, societies' aprovals figures for November were up from pounds 2.8bn the previous month to pounds 3.2bn.

"If you add up both banks and building societies' figures, the underlying picture is of a rise in lending over the past few months.

"This is further evidence that the market is slowly begining to sniff the air again," a CML spokewoman said. Gary Marsh, a senior manager at the Halifax, said:

"We are not trying to talk up the market. Indeed, while we believe the last five months' figures indicate the collapse in prices has peaked, we don't claim things will be on the up and up forever.

"Our new year prediction of 2 to 3 per cent increases in house prices for the next 12 months includes the possibility of negative monthly figures as well, although this has not happened in December."

Tim Sweeney, director general at the BBA, also sounded a cautiously optimistic note: "Net lending by the major banks strengthened a little. With the building societies reporting a sharp increase in net advances in November, the lending data add support to the view that the new year may see a modest improvement in the housing market.

"Compared to the very buoyant October figures, new approvals fell back, though part of this drop was probably seasonal in nature." Don Smith, UK economist at HSBC Greenwell, said:

"We believe the Halifax figures show the market is heading in the direction we have predicted for some months now.

"Although new approvals by banks are down, it is likely that this is a reflection of the fall in market share.

"What needs to be examined here is the seasonally-adjusted figures for net lending, which were up month-on-month."