House prices slowed by number of homes on market
03 April 2003
The latest survey of house prices has suggested a further cooling of the market.
The Halifax found that house prices in March grew by 1.1 per cent compared to 1.8 per cent growth in February.
The Halifax claimed that the cooling of house price growth was due to a large number of properties coming on to the market. A shortage of suitable properties has been helping drive the significant house price inflation over recent years.
According to the survey house prices across the country are growing by 23.4 per cent annually, taking the cost of an average home to £127,040.
The Halifax claims that house prices will continue to rise during 2003 but at a much slower rate and with wide regional differences. The bank believes that 2003 will be the 'year of the north' as house prices slow the most in the south and in London.
The survey highlighted the regional differences with the East Midlands seeing the biggest increase in house prices (34 per cent) followed by the North (31 per cent) and Yorkshire and the Humber (28 per cent). Greater London has slipped down the Halifax's regional house price inflation table in recent months with a 19 per cent rise over the past year putting the capital ninth out of the 12 UK regions.
The Halifax believes that the conditions that have helped the housing market, such as low interest rates and high employment, will remain. The much sharper rise in house prices compared to average earnings in the recent past is reducing the pool of buyers, particularly potential first-time purchasers, according to the Halifax's Chief Economist, Martin Ellis.
Evidence from the Council of Mortgage Lenders at the end of March showed that this constraint is beginning to bite when falls in the proportion of mortgage lending accounted for by first-time buyers went below 30% of all loans to home purchasers for the first time in February.
Mr Ellis stated, 'We expect the difficulties that first-time buyers face in entering the market, particularly in the south of England, to increasingly curb demand and cause house price inflation to moderate gradually during the rest of 2003. There will, however, be a marked north/south divide with the market slowing to a much greater extent in the south. In contrast, conditions across northern Britain are set to remain buoyant, making this the 'year of the north'.'
The Halifax expects annual house price inflation to slow from 26 per cent at the end of 2002 to 9 per cent at the end of 2003.