House prices fell in October for the second month running, Halifax Bank said yesterday, reinforcing the case of analysts predicting a property market downturn.
Halifax said its house price index showed a 0.5 per cent fall in house prices across the UK last month, following a 0.6 per cent fall in September, taking the value of the average home to £197,248.
The latest falls lowered the annual rate of house price inflation to 8.9 per cent, Halifax added, a significant drop from 10.7 per cent in September.
The bank also warned that housing market activity was declining, with 11 per cent fewer mortgage approvals during the third quarter of the year than in the same period of 2006.
Martin Ellis, Halifax's chief economist, said the bank's latest figures suggested an easing of house price growth, rather than signalling a correction or crash. He pointed out that house prices had still risen by 0.3 per cent over the whole of the third quarter.
"The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity," Mr Ellis said.
"However, the UK economy is in a strong position – sound market fundamentals, including high levels of employment and a shortage in the number of properties for sale, will continue to support house prices."
Nevertheless, some economists now take a much more gloomy view of the prospects for the UK's housing market.
Brigid O'Leary, a property specialist at Capital Economics, said that while house prices had fallen in two consecutive months as recently as 2005, there were now good reasons to expect sustained falls.
"Affordability is stretched, new buyer enquiries and mortgage approvals are falling quickly and lending criteria are tightening," Ms O'Leary said. "We believe that over the next couple of years, house prices are more likely to fall than rise – we expect prices to fall by 3 per cent in 2008."
Howard Archer, the chief UK and European economist at Global Insight, said he was more inclined to take account of the Halifax data than figures produced by Nationwide Building Society last month, which showed prices increasing in October.
"Most data and survey evidence are pointing to weakening housing market activity and cooling prices," Mr Archer said.Reuse content