So UK house prices were up by 1.9% last month, according to the Halifax.
Really? Maybe we should just forget that Nationwide just said that house prices dropped 1.3% in the same month?
If Halifax’s figures are true, then it would be the first time in well over a year that prices have not fallen on a monthly basis, and contrary to most market expectations.
The UK's biggest mortgage lender said that the rise last month offset December's fall of 1.6%; and the average house now costs £163,966, the Halifax said.
But the Halifax, whose survey is among the most carefully watched indicators of market confidence, did warn against paying too much attention to just a single month.
Look at the Halifax house price index for January 2009 here.
Martin Ellis, the Halifax's housing economist, said:
"There are some very early signs that market activity may be stabilising, albeit at quite a low level. Nonetheless, continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to mean that 2009 will be a difficult year for the housing market."
The survey from the Halifax comes shortly after the Bank of England cut interest rates for the third month in a row in a desperate effort to stimulate the economy.
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Although Halifax’s figures could be seen as good news, their figure doesn’t tell the full story. House prices have still fallen by 5.1% over the last three months and have dropped by 17.2% over the previous 12 months.
Maybe recent cuts in interest rates, (which have made mortgage payments more affordable for new homeowners), have tempted a few of you into dipping a toe in the housing market water.
After all, on average we pay 21% of our gross monthly earnings towards our mortgage, compared with 31% in the first half of 2008, says the Halifax. What’s more, the house price-to-average earnings ratio has dropped to around 4.5 times in December from 5.84 at its peak in July 2007.
But let’s put that into some context; that’s still 10% higher than the long-term average ratio of 4 times (going by the Halifax’s figures).
- Have prices bottomed out?
Equally telling is the fact that mortgage lenders still require you to have deposits of 15%-20% before they lend to you as a first-time buyer. Why? Because they believe property prices will drop by at least 10%-15% in 2009. Only when mainstream mortgage lenders start offering 95%-100% mortgages again, should you start believing prices have bottomed out.
The biggest factor that hangs over the housing market is unemployment. If it heads towards 3 million this year, then it’s not just the number of job losses but the fear of job loss that will prevent millions of us from even contemplating buying a new house.
So, while house prices may have risen slightly in January, is the start of an upward trend?
Here are few questions worth asking:
- Have we hit the very bottom already? Have loads of us, having decided that prices just can’t go any lower, suddenly jumped back into the market?
- Is government economic policy, with its focus on trying to force the banks to throw credit at us again, finally having an effect?
- Or is this a brief respite in a long downward spiral, down only to a ‘post Christmas bounce’ as many of us decide we can’t wait for the inevitable house price falls to reach their inevitable conclusion?
- Or this is just a statistical anomaly, from an industry already drowning in pointless stats but starved of any real business?
What do you think of the latest house prices stats? A reason to be cheerful or just a temporary aberration in a falling market?
Let us know in the comments below.
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