Slowdown as house prices 'go off the boil'

Further evidence of a slowdown in the housing market emerged yesterday when Halifax, the country's biggest mortgage lender, reported a small fall in property prices. The high street bank said prices had slipped 0.5 per cent during October.

Further evidence of a slowdown in the housing market emerged yesterday when Halifax, the country's biggest mortgage lender, reported a small fall in property prices. The high street bank said prices had slipped 0.5 per cent during October.

The dip was a response to slowing economic growth, worsening employment prospects and a blow to consumer confidence after the terror attacks in the US.

But the decline was lower than in October last year, and annual house-price inflation nudged up to 9.4 per cent for the year to the end of October, from 8.8 per cent in September.

Halifax's figures, an important indicator of the health of the property market, mirrored last week's house-price survey from Nationwide, which also recorded a 0.5 per cent fall in prices during October.

Lenders say the residential property market, which surged throughout most of 2001, had "come off the boil". Martin Ellis, a group economist for Halifax, said: "House-price movements over the past few months indicate a clear downward shift in the underlying trend, with prices increasing at a somewhat slower pace compared with earlier in the year. This is consistent with reports from estate agents and house-builders, and the latest market figures on the number of mortgage approvals, which all show signs of a slowdown."

Simon Rubinsohn, a chief economist at the stockbroker Gerrard, said: "We expect the recent downturn in turnover to increasingly be reflected in price weakness, particularly in London and the South-east.

"Rising unemployment, on the back of a daily diet of redundancy announcements, is the likely trigger for a modest fall in prices. But any decline does need to be kept in context. Over the past five and a half years, London prices have climbed by more than 130 per cent. Nationally, the increase has been around 80 per cent."

Halifax said the average price of a property was £93,616. There was no need for home-owners to panic, the bank said, adding that the attacks in the US were likely to affect the market only temporarily.

The figures indicated an abrupt end to the summer boom, an important feelgood factor for the economy. David Bitner, of the Bradford & Bingley building society, said: "People have for the last three to four years achieved asking price for properties. Now we have seen a general slowdown in buyers and properties increasing. This has caused people to be able to barter, and people are willing to accept offers below the asking price."

He said the market looked stable, and he saw no evidence for a big fall in prices while interest rates remained so low.

For the Halifax, Mr Ellis said that, despite the fall, the group still expected house prices to rise during the next year. "Looking ahead, continuing economic growth, low interest rates and housing affordability levels that are not stretched should support the housing market," he said.