Market for housing is in 'limbo', says bank's expert

The housing market is lacking direction, Halifax has warned. Its latest house price index, published yesterday, showed that property prices slumped a further 0.5 per cent last month after falling 1.1 per cent in August.

Over the quarter, prices showed an increase of 0.1 per cent, the first quarterly increase since the first three months of 2010. But that is not a sign that the market is picking up, said Martin Ellis, housing economist at the bank.

"We've experienced a mixed monthly picture so far this year with four rises, four falls and one no-change since January," he pointed out. "This mixed pattern is consistent with a market where prices are lacking genuine direction."

Alex King, a director of the mortgage broker SPF Private Clients, said: "Once again the property market continues to bounce around with no discernible direction. Low interest rates, cheap mortgage finance and, in many areas, a shortage of homes are propping up prices while weak consumer confidence and reduced disposable incomes are causing people to sit on their hands. The market is essentially in limbo."

The average price of a home has fallen 2.3 per cent in the past year to £161,132, according to Halifax. But mortgage affordability appears to be improving. Typical mortgage payments for a new borrower have fallen from a peak of 48 per cent of average disposable earnings in mid 2007 to 26 per cent in the last three months.

That leaves it at its lowest level since 1997 and significantly lower than the average of 37 per cent recorded over the past 25 years.

However, greater uncertainty about the economy and individuals' financial circumstances, together with pressure on home-owners' finances from weak earnings growth, higher inflation and increases in taxes, will continue to hold back housing demand, Halifax said.

Mr Ellis said that low interest rates and a rise in employment over the past year have supported the market, bringing about stability for prices and activity.

"We expect little change over the remainder of this year," he added.