Property market picks up after slump

House prices recovered by 0.6% during July as the property market reversed all of the slump seen in the previous month, new figures revealed today.

The Halifax said the mixed pattern of monthly rises and falls in the year to date was consistent with a slowing market.

It expects that house prices will be broadly unchanged across 2010 and said low interest rates and a recovering economy were helping to underpin demand.

The average house price is now £167,425, which is 16% below the peak seen in August 2007.

Halifax said the increase in the number of properties for sale over the past few months, boosted by the recent abolition of Home Information Packs (HIPs), has relieved much of the pressure which was driving up prices in 2009.

June's fall of 0.6%, which followed price declines in April and May, came amid uncertainty over the impact of Chancellor George Osborne's emergency Budget.

Halifax housing economist Martin Ellis said: "The mixed pattern of monthly rises and falls over the first seven months of the year is consistent with a slowing market.

"It is also in line with our view that house prices will be broadly unchanged over 2010 as a whole.

"The increase in the number of properties for sale over the past few months, boosted by the recent abolition of HIPs, has relieved much of the pressure that was driving up prices in 2009.

"Low interest rates and a recovering economy, however, are underpinning demand and continue to support the market."

Howard Archer, chief UK economist at IHS Global Insight, said the 0.6% rise in July did not alter his view that house prices will ease back over the rest of 2010 and soften again in 2011.

He added: "On balance, while we believe that a sharp correction in house prices is unlikely, we do expect them to ease back by around 3% over the second half of 2010.

"Furthermore, it is hard at this stage to be optimistic about house prices in 2011 as the fiscal squeeze will increasingly kick in, which will hit people's pockets and lead to serious job losses in the public sector.

"Consequently, a further drop of around 5% in house prices looks highly possible in 2011, although much will depend on mortgage availability and the amount of houses coming on to the market."