Key Points
- House prices increased by a seasonally adjusted 0.8% in January. Despite this rise, prices have increased by only 1.4% over the past six months.
- The annual rate of house price inflation has fallen from a peak of 22.1% last July to 13.7% in January as the market continues to slow. This is the lowest annual rate since December 2001 (11.7%).
- Housing market activity has fallen by around one-third since May 2004 when activity began to fall. The latest figures from the Bank of England and RICS, however, suggest that the recent decline in activity may be beginning to level out. There was a rise in the number of loans approved for house purchase in December to 83,000 (seasonally adjusted) from 77,000 in November (source: BoE). Sales recorded by estate agents were unchanged in December, marking the first time in nine months that sales did not fall (source: RICS). Halifax Estate Agents also saw the first upturn in sales agreed for six months in January.
- The housing market is underpinned by strong economic fundamentals. The UK economy grew by 3.1% during 2004: the fastest rate of growth for four years. The strength of the economy has been reflected in the labour market with the number of people in employment in the three months to November up 271,000 compared with a year earlier.
ABOUT THE HALIFAX HOUSE PRICE INDEX
The Halifax House Price Index is the UK's longest running monthly house price series with data covering the whole country going back to January 1983. The Index is typically based on around 15,000 house purchases per month, and covers the whole calendar month. From this data, a "standardised" house price is calculated and property price movements on a like-for-like basis (including seasonal adjustments) are analysed over time. Properties over £1 million are included and the index is seasonally adjusted with the seasonal factors updated monthly.
Commenting, Martin Ellis, Chief Economist, said: "The housing market continues to slow with the annual rate of house price inflation easing further in January. House prices have increased by only 1.4% over the past six months, causing the annual rate to decline from a peak of 22.1% last July to 13.7% in January. This is the lowest annual rate since December 2001.
The reduction in house price growth and activity since mid 2004 has been a result of the increasing affordability difficulties facing first-time buyers and the rise in interest rates since late 2003, which have curbed housing demand.
The ongoing strength of the UK economy and the labour market remain solid foundations for the housing market, ensuring that it remains in good health. The second successive monthly rise in house prices in January suggests that the market is undergoing a measured slowdown."
Market indicators suggest that the decline in activity may be beginning to level out
The number of loans approved for house purchase has fallen by one-third since May 2004 when activity began to fall, according to the Bank of England. There was, however, a modest rise in December to 83,000 from 77,000 in November (seasonally adjusted).
Sales recorded by estate agents were unchanged in December, marking the first time in nine months that sales did not fall, according to the latest RICS survey. The survey also showed that new buyer enquiries were broadly steady in December for the second successive month following a sharp decline between May and October 2004. Halifax Estate Agents also saw the first upturn in sales agreed for six months in January.
Strong economy and labour market have supported the housing market ……
The UK economy grew by 0.7% in the final quarter of 2004 with the economy expanding by 3.1% during 2004: the fastest rate of growth for four years.
The strength of the economy has been reflected in the labour market with the number of people in employment in the three months to November up 99,000 from the three months to August 2004 and 271,000 higher than a year earlier.
…and should continue to do so in 2005 despite a slowdown in economic growth
Notwithstanding last year's good performance, the UK economy slowed between the first and second halves of 2004, and we expect this slowdown to continue in 2005. Over the next twelve months, economic growth is likely to ease back from around the economy's long-term average growth rate of 2.5%.
Despite the expected slowdown, the economy is set to grow at a pace that is consistent with continuing strength in the labour market. As a result, the broad economic backdrop should continue to underpin a sound housing market.
UK House Prices: Historical Data
All Houses, All Buyers (Seasonally Adjusted)
Index
1983=100
1 Standardised
Average
Price
£
2
Monthly
Change
%
Annual
Change
%*
Price/
Earnings
Ratio
3
Period
2000 Q4 278.6 86,095 - 5.7 -
2001 Q4 311.8 96,337 - 11.7 -
2002 Q4 392.1 121,137 - 26.4 -
2003 Q4 455.3 140,687 - 15.4 -
2004 Q4 524.1 161,940 - 15.1 -
Jan 2004 470.7 145,430 2.4 16.0 4.99
Feb 479.6 148,183 1.9 17.8 5.25
Mar 490.4 151,509 2.2 18.5 5.33
Apr 499.9 154,449 1.9 19.1 5.42
May 510.7 157,785 2.2 20.4 5.53
Jun 516.8 159,685 1.2 21.5 5.58
Jul 522.6 161,466 1.1 22.1 5.63
Aug 519.7 160,584 -0.5 21.3 5.58
Sep 526.5 162,669 1.3 20.5 5.63
Oct 519.9 160,639 -1.2 18.5 5.53
Nov 518.7 160,259 -0.2 16.8 5.50
Dec 525.9 162,493 1.4 15.1 -
Jan 2005 530.0 163,748 0.8 13.7 -
