Confusion Grows On Property Market 05/04/2005

A contrasting report on the property market was released by Britain's largest mortgage lender today, increasing the confusion as to the state of the market.

The Halifax published it's monthly report today which stated that house prices rose by 0.5% in March, offsetting February's fall of 0.5%, just days after Nationwide, Britain's largest building society, said values tumbled 0.6% in March - the biggest monthly fall in 10 years. The report also mentioned a further slowdown in the annual rate of inflation to 9.7%, dropping below 10% for the first time since November 2001.

"The increase in interest rates between November 2003 and August 2004, and the difficulties facing potential first-time buyers in purchasing a property, have caused the housing market to slow since mid 2004," said Halifax's chief economist, Martin Ellis. He added, "The ongoing good health of the UK economy and the associated strength of the labour market, together with historically low interest rates and a shortage of housing supply, however, appear to be limiting the extent of the downturn. There are increasing signs that activity levels are now stabilising and house prices are broadly static at a national level."

The Bank of England have raised the base rate from a low of 3.5% to 4.75% since November 2003 in a bid to slow consumer spending and a booming property market. It remains unclear whether the Monetary Policy Committee is entirely satisfied, but it is not expected to raise rates again until May or even June.

A breakdown of the figures produced by Halifax shows that the strongest house price gains in the first three months of 2005, occurred outside England. Prices rose 6.1% in Scotland, 3.1% in Northern Ireland and 2.4% in Wales. The average house price in Scotland rose to £105,397, breaking through the £100,000 barrier for the first time.

In England, prices have fallen fastest in the South-West (-1.2%), East Anglia (-0.9%) and the North (-0.6%) since the beginning of the year. The biggest gains were in Yorkshire and Humberside (1.7%), the East Midlands (1.6%) and the South-East (1.3%).

Prices in London increased slightly by 0.1% since the start of 2005, a sign that the capital's market may be stabilising according to the Halifax.

Over the past year, there has been a clear divide between the north and the south with Northern Ireland, Scotland and Northern England experiencing the largest price increases, while Greater London, the South-East and the South-West have experienced the smallest gains. The gap between the north and south is continuing to close, with the difference between average prices falling £16,000 in two years to £83,000.

Howard Archer, economist at investment firm Global Insight, said that the market was showing signs of stabilisation, and in some cases modest improvement compared with the second half of 2004, "when higher interest rates and stretched affordability ratios increasingly weighed down on the market."

Mr Archer added, "This suggests that while house prices will remain soft in the near term at least, they are unlikely to plunge."