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Halifax index shows house prices grind to a halt

07 March 2008 / by Rachael Stiles
House prices are slowing down. According to the Halifax’s house price index for February 2008, house prices fell by 0.3 per cent this February, taking the annual rate of inflation down to 4.2 per cent.

The Halifax also predicted that house prices will remain flat overall during 2008; it stated that house prices are being supported by the rise in employment and low interest rates.

Despite the Bank of England yesterday maintaining the 5.25 per cent bank rate, the Halifax expects them to cut this rate at least twice during 2008. Mark Ellis, chief economist for the Halifax, commented,

"Whilst the housing market has slowed over the past six months, it is supported by sound economic fundamentals. Interest rate cuts by the Bank of England are also helping to underpin house prices. Nationally, we predict that house prices will be flat in 2008."

The average price of a home in the UK is now £196,649, £4,390 more than in 2007. Stamp duty revenue has more than doubled over the past 5 years, rising from £2.7 billion in 2001/2 to £6.4 billion in 2006/7. The average UK home owner currently ends up spending 7 per cent of their average annual income on stamp duty.

Despite February’s lull in house prices, the Halifax reported that housing market activity has declined significantly in the last twelve months. This is not surprising, considering the rising costs and the high street mortgage lenders’ stricter criteria as a result of the impending credit crunch.

Consequently, the Royal Institute of Chartered Surveyors (RICS) has reported an increase in the demand for rental properties. RICS spokesperson Barry Hall, commented,

"While banks remain cautious about offering loans, demand for rental property will continue to increase with many would-be-buyers unable to make the jump to home ownership.

"Established investors continue to reap the benefits of the current uncertainty in the housing market and have been enjoying the fruits of rising rents, but new investors are struggling to get the necessary finance to enjoy this buoyant sector."

Existing landlords are benefiting from a rise in rental expectations, whereas potential investors and first time buyers are struggling as mortgage products for both purposes become few and far between.

© Fair Investment Company Ltd