House prices continue to slow
02 May 2003
Further signs that the housing market is slowing down have been reported by a survey by the mortgage lender the Halifax.
The Halifax found that house prices in April grew by 0.4 per cent, continuing the slowdown in prices seen in the first quarter of 2003. The bank pointed out that the 15 per cent increase in the number of properties being put up for sale was the main downward pressure on prices.
The Halifax also cited a marked decline in the number of first time buyers entering the market as contributing to the slowdown in house price inflation.
Martin Ellis, Chief Economist at the Halifax, highlighted that the number of new mortgages for first time buyers fell to 31 per cent in the first three months of 2003 compared to 38 per cent in the last quarter of 2002.
Mr Ellis commented, 'A drop in the proportion of mortgage lending accounted for by first-time buyers to 31 per cent of all loans to home purchasers in the first three months of 2003 from 38 per cent in the last quarter of 2002 shows that many potential new homebuyers cannot enter the market. This decline reflects the much sharper rise in house prices compared to average earnings in the recent past with many borrowers now unable to borrow enough to buy their first home.'
According to the latest survey the average house now costs £127,557 and the annual rate of price inflation is 23.6 per cent.
Mr Ellis agued that with fewer first time buyers and more properties on the market, the slowdown in house price inflation is set to continue over the rest of the year. However, he believes that the low interest rates, high levels of employment and a possible rate cut in the short-term will ensure that the market slows rather than crashes.
The Halifax believes that the slowdown will be more acutely felt in London and the South East than in the North of England.
Mr Ellis added, 'The fundamental factors that have been driving prices up sharply over the past 12-18 months, however, are still firmly in place. Mortgage rates are at their lowest since the late 1950s, with the possibility of a further rate cut in the short-term. Unemployment remains low despite a small increase in the numbers claiming benefit in the past two months. Importantly, mortgage payments account for a lower proportion of a new borrower's income than at any time since 1984, at 15 per cent.'