UK property prices rise by a better than expected 0.9% during December but the annual gain continues to decline

8th January 2015

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UK properties enjoyed a stronger-than-expected month-on-month price rise during December but the annual growth rate continued to ease back as the market continues to come off the boil.

According to the latest figures from Halifax house prices jumped by 0.9% over the month, following an increase of 0.5% in November and a dip of 0.4% in October.

But the year-on-year gain eased back further to 7.8% in the three months to December, which was the lowest increase since the three months to February.

Commenting on the latest numbers, Martin Ellis, housing economist Halifax said:“The deterioration in housing affordability as a result of rising house prices, earnings growth that has been consistently below consumer price inflation until very recently and speculation of an interest rate rise, have combined to temper housing demand since the summer.

“The weakening in housing demand has led to a reduction in both price growth and sales in recent months.”

IHS Global Insight’s chief UK and European economist Howard Archer highlighted that the latest figures reported by the lender contrast with recent data from competitor Nationwide, which for its part reported a rise of just 0.2% month-on-month during December.

On the Nationwide’s measure, the year-on-year increase in house prices moderated to a 13-month low of 7.2% in December from 8.5% in November and a peak of 11.8% in June – the highest since January 2005.

Archer said: “The contrast between the Halifax and Nationwide data for December highlight that house prices measures can be volatile between surveys and from month to month. The overall evidence indicates clearly that house prices have been reined in significantly in recent months by a moderation in house price activity.”

Notably the latest numbers from the Bank of England show that  mortgage approvals for house purchases fell for a fifth month running to be at a 17-month low in November, although the rate of decline did slow.

“Specifically, the Bank of England reported that mortgage approvals for house purchases retreated to 59,029 in November from 59,511 in October, 61,312 in September and 66,728 in June. It also took mortgage approvals 22.9% below the 74-month high of 76,611 seen in January 2014. Furthermore, latest survey evidence from the Royal Institution of Chartered Surveyors (RICS) shows a fifth successive fall in buyer enquiries in November and a fourth successive drop in agreed sales, the first declines since September 2012,” added Archer.

As the background stands, Archer suspects that the weakening of buyer interest in houses may be close to bottoming out and he sees it picking up to a limited extent in 2015 from current levels.

He said: “On the assumption that there will be some pick-up in housing market activity during 2015 from current lows, we expect house prices to rise by a solid but unspectacular 5% in 2015. This compares with the peak double-digit annual house price increases seen earlier in 2014; 10.2% in the three weeks to July in the Halifax’s case.”

Ellis continued: “We expect a further moderation in house price growth over the coming year with prices nationally predicted to increase in a range of 3 to 5% in 2015. Housing demand, however, should continue to be supported by a growing economy, rising employment levels, still low mortgage rates and the first gain in ‘real’ earnings for several years.”

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