Britain's biggest building society and mortgage lender says in its year- end housing market review that it expects the annual rate of house-price inflation to be about 5 per cent by the end of next year. That compares with an expected inflation rate of about 3.5 per cent for 1994's fourth quarter.
The society argues that houses are as affordable now as at any time for the past 10 years.
As interest rates have plummeted, the repayment ratio - mortgage payments as a percentage of male average earnings - has fallen from almost 50 per cent in 1989-90 to about 22 per cent, the lowest for a decade. That means repayments on a pounds 60,800 mortgage that would have been pounds 620 a month in 1989 are today pounds 280, while earnings have risen by 30 per cent.
'Affordability has returned to the housing market,' says the Halifax, arguing: 'The low level of house moves in recent years also means there is pent-up demand waiting to be realised when confidence returns . . . Confidence remains the limiting factor.'
Nevertheless, it says greater affordability has prompted the beginnings
of a recovery. The number of people moving house, which tumbled from
2.1 million in 1988 to 1.1 million in 1992, is rising again.
'During 1993 the rapid decline has levelled off and transaction numbers are now likely to be up to 5 per cent higher than they were in 1992,' the society says. Next year it expects sales to increase by up to 15 per cent to around 1.3 million house moves.
The Halifax admits that it underestimated the depths of the current collapse in house prices, expecting a stronger recovery by this point in the cycle.
However, it says prices have stabilised after four years of falls and should end the year at about 2 per cent. That recovery has been fuelled by a gradual rise in net mortgage lending, which bottomed in the winter of 1992-93 at under pounds 3bn for the quarter. That figure rose to pounds 5bn in the third quarter of 1993, a performance likely to have been matched in the fourth quarter, which should give an pounds 18bn year total.
That is slightly below the 1992 figure and well down on the pounds 40bn net lent in 1988. But the Halifax argues that there is no sign that the total amount of mortgage debt is shrinking, though the rate of its increase is slower than it was in the late Eighties.
It believes net lending in 1994 will pick up sharply to around pounds 22bn, and then increase by about pounds 2bn a year through the rest of the decade.
House prices in the South of England are now only about 15 per cent higher than the national average, compared with more than 60 per cent in 1988.
Those in the North are 15 per cent below the national average, compared with 35 per cent at the peak.