House price rate of increase to halve in 2004
07 January 2004
House price rises will slow dramatically this year, as first-time buyers are priced out of the market, a new survey from the Halifax suggests.
House prices will only rise by 8 per cent during 2004, the bank's housing index for this month claims, compared to 15.4 per cent for 2003.
Although the rate of increase rallied in December to 1.3 per cent - bringing the cost of the average house to £142,033 - the number of first-time buyers slumped to its lowest ever level.
The bank warned, “Traditionally, the problems first-time buyers have experienced trying to get on to the housing ladder have been confined to London and the South-east.
“As house prices outside these two regions continue to rise, the first-time buyer problem will extend to all UK regions by the end of 2004.”
House prices rose by over 30 per cent in the north east and north west last year, compared to just 5.8 per cent and 8.6 per cent in the south east and Greater London, respectively.
However, the Halifax suggests that the proportion of average mortgage payments to gross household income will be around 16 per cent in 2004 - below the long term trend figure of 21 per cent - even if, as expected, interest rates rise to 4.5 per cent by the end of the year.