Housing data boosts hopes of soft landing for economy in 1998

Hopes for a soft landing for the economy in 1998 received a boost yesterday after the UK's biggest mortgage lender said the housing market was poised for a slowdown, while new figures showed business failures were at a seven-year low. Diane Coyle and Michael Harrison report.

Halifax joined the other lenders in forecasting that house prices would rise more slowly in the next year. It predicted yesterday that house price inflation would drop from 6 per cent in 1997 to around 5 per cent in 1998 and 4 per cent the following year. Nationwide, the biggest building society, believes growth will fall even more sharply, from 12.6 per cent this year to 7 per cent in 1998.

Hopes that the economy is gliding towards a gentle slowdown got a boost from separate figures showing that the number of British businesses going bust fell to a seven-year low in 1997. The figures, published by the business information group Dun & Bradstreet, showed that 36,368 businesses failed this year - a drop of nearly 5,000 on 1996 and the lowest level of failures since 1990.

Philip Mellor, a senior analyst at Dun & Bradstreet, said: "Provided there is no substantial downturn in the economy, the country's annual tally of business casualties will be back to pre-recessionary levels by the millennium."

The steep fall in the number of businesses going to the wall in 1997 came as a surprise. After a sharp reduction in 1994, the decline in the failure rate appeared to have reached a plateau at around the 40,000 mark. But there was a marked slowdown in the number of business failures as the year went by with the figures dropping from more than 10,000 in the first quarter to under 8,000 in the last three months of the year.

Most predictions for the housing market are, like forecasts for the economy as a whole, converging on a soft landing. Halifax's forecast for house prices during the next year - with a regional range of 3 to 8 per cent - is close to recent predictions from Nationwide and the Council of Mortgage Lenders (CML). The CML put the next year's increase at 5-6 per cent, while Nationwide opted for 7 per cent.

However, this near-consensus disguises a sharp difference between the two big lenders as to what has happened during 1997. According to Halifax, house price inflation in the UK did not exceed 7.2 per cent at any point in 1997.

But according to new December figures from Nationwide, prices increased by 0.8 per cent during the month to take the annual rate to 12.6 per cent. While the upward trend has slowed, its recorded UK average house price has now reached pounds 62,037.

Paul Sanderson, head of research, said: "The market has come off the boil recently." The outlook for 1998 depended on the severity of the economic slowdown, he said.

City economists are inclined to split the difference, saying house prices probably climbed by around 9 per cent in 1997. Comprehensive Department of the Environment figures will not be published until well into the new year.

Halifax's new report says the idea there has been a boom is a misleading generalisation based on a few areas in London. "There has been no evidence in 1997 of any `ripple' effect away from London of this faster growth in house prices," it says.

"Sustainable, healthy recovery" is both its prognosis for the housing market in 1998 and its diagnosis for the past 12 months.

"No move back to housing boom and bust is likely," the report says. It adds: "If inflation in the economy generally remains at or around current levels, this 1960s pattern might well characterise the UK housing market not only in 1998 and 1999 but also for the early years of the new millennium." While Nationwide agrees that demand has weakened, it foresees a continuing recovery with a "ripple" out to other regions.

Aside from this disagreement, the pattern of the recovery so far is reasonably clear. As Halifax's report notes, home sales has been steady at around 120,000 a month.

The annual total of 1.45 million is well up from the 1995 low of 1.1 million but well below the peak of 1.7 million in the late 1980s. The recovery in the number of transactions has come about despite the fact mortgage rates have been rising since May.

Halifax's mortgage rate has climbed from 7.25 per cent at the start of 1997 to 8.7 per cent at the end of the year. Its 1998 forecasts are based on the assumption that the level of interest rates will rise by another half to three-quarters of a point.

Outlook, Page 23

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
tvPoldark, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Lois Pryce... Life Without a Postcode. Lois lives on a boat with her husband.. Registering to vote in the election has prooved to be very difficult without a fixed residential post code. (David Sandison)
newsHow living on a houseboat meant I didn't officially 'exist'
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing