Housing market: December revival can't cure the post-summertime blues

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The Independent Online

House price inflation staged a surprise comeback in December after three consecutive monthly falls, according to the Halifax. In the run-up to Christmas, average prices rose 1.3 per cent.

But the figures for the whole of the final quarter of 2007 show a 0.8 decline on the summer months.

Increasing pressure on household incomes has caused the slowdown since the summer, said Martin Ellis, chief economist at the Halifax. "Higher mortgage repayments in response to the series of five interest rate increases between August 2006 and July 2007, along with falling real earnings, have resulted in a slowdown in both house price growth and activity in recent months."

The 1.3 per cent rise in December contradicts statistics from Nationwide, according to which prices fell 0.5 per cent during the month. Normally, sales are sluggish in the weeks leading up to Christmas, so the monthly figure is not considered particularly significant.

The Halifax, like Nationwide and many other analysts, expects that house prices will flatline during 2008. Mr Ellis said falls in the early part of 2008 were likely to be offset by renewed activity in the late summer and autumn, as the recent lowering of UK interest rates starts to improve sentiment and increase buyer affordability.