UK house prices rebound unexpectedly in January pushing the annual growth rate back up to 8.5%

5th February 2015

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UK house prices bounced back robustly in January taking the annual rise back up to 8.5% according to new numbers from Halifax.

The lender’s figures show that prices unexpectedly rose 2% month-on-month in January following a 1.1% month-on-month increase in December. This followed an increase of 0.5% in November and a dip of 0.4% month-on-month in October.

As a result of the latest gain, the year-on-year increase in house prices moved back up to 8.5% in the three months to January after moderating to 7.8% in the three months to December – the lowest increase since the three months to February 2010.

Martin Ellis, housing economist at Halifax said: “This bounce-back in house price growth in January coincides with reports of the first rise in mortgage approvals for six months in December. These improvements may indicate that the recent declines in mortgage rates, the reform of stamp duty and the first increases in real earnings for several years are providing a modest boost to the market. It is, however, too early to draw any firm conclusions.”

Howard Archer, chief UK & European economist at IHS Insight however believes the 2% jump is hard to explain and looks “markedly at odds with other latest data and survey evidence”.

For example, the Bank of England reported that mortgage approvals for house purchases fell for five successive months to be at a 17-month low of 58,956 in November. Furthermore, at 58,956 in November, mortgage approvals were 22% below the 74-month high of 75,557 seen in January 2014.

Highlighting separate data from Nationwide, he noted that house prices rose just 0.3% month-on-month in January after an increase of 0.2% month-on-month in December.

He said: “Consequently, the year-on-year increase in house prices moderated to a 14-month low of 6.8% in January from 7.2% in December, 8.5% in November and a peak of 11.8% in June, the highest since January 2005.”

The Halifax itself noted that monthly figures in January can be particularly volatile due to the lower volumes of activity at this time of year and there have been unusually large rises on occasions in the past, such as in 2007, with 2.3% and 2009, at 2.45%.

Archer added: “The overall evidence indicates strongly points to house prices being reined in significantly in recent months by a marked weakening in housing market activity compared to the early months of 2014.

“We have little doubt that the spike in house prices in January reported by the Halifax is an outlier. Nevertheless we do suspect that the weakness in housing market activity may be bottoming out and we see activity picking up to a limited extent in 2015 from current levels.”

 

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