Property market 'levelling out'

Property market 'levelling out'

House prices edged up slightly for the second month in a row in January, according to Halifax's monthly index, published today.

The increase was modest, a rise of just 0.8% this month. Property prices have risen by just 1.4% over the past six months. Across the year, prices rose by just 13.7% to January, compared with a peak in inflation of 22.1% in July 2004. This represents the lowest annual increase since December 2001.

Activity in the housing market has dropped by about a third since May last year, and the number of mortgages approved fell to the lowest levels in almost a decade. Figures published this week by the Bank of England showed that the number of mortgage approvals had risen from 77,000 in November to 83,000 in December.

Further signs that decline in buying and selling in the property market may be levelling out came when the Royal Institution of Chartered Surveyors announced that sales recorded by estate agents were unchanged in December. This was the first time in nine months that agents had not reported a fall in the number of sales.

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Martin Ellis, chief economist at Halifax, said: "The housing market continues to slow with the annual rate of inflation easing further in January."

Mr Ellis said that the slowdown was a result of the increasing difficulties met by people struggling to buy their first property, and increases in the cost of borrowing brought about by rises in the Bank of England base rates since the end of 2003.

However, he added: "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."

Howard Archer, chief economist at investment firm Global Insight, said: "The Halifax data clearly indicates that a sharp correction in house prices is not occurring at the moment, and it certainly dilutes any case for an interest rate cuts in the near term."

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