House prices rise by 1.6%: Halifax predicts sustained recovery in second half of 1993

HOUSE PRICES rose by 1.6 per cent last month and could be on track for an increase of 5 per cent over the year, according to the Halifax Building Society.

The second month of rising prices means that house prices have already risen by 2.5 per cent since January, to an average of pounds 63,144.

Gary Marsh, Halifax's house price economist, said that he expected prices to rise, but warned that there might still be months when prices would drop. 'We are at the turning point. But the speed of rises has surprised us. Unless there are more falls than rises - which we don't exepect - then by the end of the year we could be 5 per cent up. We have been saying all along that house prices would rise more strongly in the second half of the year.'

Prices of new houses rose by 1.9 per cent last month, which brings them back to the level of a year ago. The average new house costs pounds 68,706. Mr Marsh said house builders were quick to cut prices when the market slowed and may be quick to pick up an improvement in the market.

Last month, first-time buyers paid an average of pounds 45,676 for homes, up 3.1 per cent on the preceding month. But this still leaves the homes of first-time buyers priced 4.1 per cent below a year ago.

John Wriglesworth, a City housing analyst with the stockbrokers UBS, who has been forecasting zero growth in house prices this year, with rises of up to 10 per cent next year, said that it was too soon to revise his forecasts. 'Two swallows do not make a summer. But if I was starting now I would go for a small rise this year. But mortgage lending has not been as much as estate agents would have you believe.'

The Council of Mortgage Lenders said yesterday that home loan approvals were 25 per cent higher in the first quarter of the year than for the last quarter of 1992, when the market was particularly depressed. But they are still running at a lower rate than at any time for the past two years. Mark Boleat, the council's director general, said: 'With evidence of a recovery in the wider economy becoming increasingly apparent, the likelihood is for further solid improvement in housing market activity over the coming months.'