Housing market keeps cooling
Fri 3 December, 2004 13:16
By Ross Finley
LONDON (Reuters) - House prices fell for a second straight month in November, mortgage lender Halifax says, while predicting property prices will fall 2 percent in 2005 after nine years of gains.
A 0.4 percent fall on the month followed a 1.1 percent drop in October and was the first back-to-back monthly drop in house prices reported by the Halifax since September-October 2001 when confidence took a hit by the September 11 attacks.
The monthly drop brought down annual house price inflation to its weakest since January, at 16.8 percent in the three months to November compared with 18.5 percent in October.
Five interest rate hikes in a year and tough talk from the Bank of England have halted a boom that began in the late 1990s that saw the average price of a home more than double and analysts said the data showed it is still cooling.
"The slowdown in the housing market goes on, with latest figures from the Halifax confirming other reports of widespread, but still modest, falls in average house prices over the past few months," said Ed Stansfield, Property Economist at consultancy Capital Economics.
But the figures stand in contrast to a report published earlier this week by the Nationwide building society which said prices rose 1.0 percent in November. Nationwide, unlike the Halifax, are predicting modest price gains next year.
MEASURED SLOWDOWN?
Martin Ellis, chief economist at HBOS, said the figures suggested "a measured slowdown", but other analysts said there remains plenty of uncertainty around that view, uncertainty which the BoE has also flagged.
"The big unknown remains how deep this will become," said Howard Archer, economist at Global Insight.
"Although we remain relatively confident that a housing market slump will be avoided due to high employment, a low peak in interest rates, and a still reasonably healthy economy, we fully acknowledge that this is far from certain."
The fall in November left the average house price at 159,947 pounds, according to the Halifax.
Halifax predicted that interest rates had now peaked at 4.75 percent and that the BoE would cut them to 4.25 percent next year.
"The reason is we think that from the evidence we've seen over the last few months, it's quite clear that interest rate rises over the past year are having an effect," said Ellis. "They are slowing the housing market."
But that forecast comes at a time when a raft of recent strong economic data on the fourth quarter -- apart from house prices -- has reinforced the view that it may be too early to call a peak in borrowing costs. |
