House prices "still rising but slowing"

04 July 2003
The rate of house price growth has slowed due to a rise in the number of properties coming onto the market, according to the latest survey by the Halifax published today.

House prices in the UK rose by 0.6 per cent in June, taking house price inflation for the first six months of 2003 to 7.1 per cent, double the long-term rate of increase.

The Halifax reported that house prices in the first six months of 2003 increased much slower than the rate of increase recorded in the first six months of 2002. However, the mortgage lender stated that the rate of growth in the first six months of 2003 was much faster than they had expected.

The Halifax has revised its annual growth rate for 2003 up to 10 per cent from the 9 per cent it had originally forecast and it claimed that the annual rate of growth could possibly reach over 10 per cent by the end of the year.

The mortgage lender reported that there is a pronounced North/South divide in house price growth. In the second quarter of 2003, the biggest price rises in Britain were seen in the North (8.0 per cent), Yorkshire and the Humber (6.8 per cent) and West Midlands (5.5 per cent).

At the same time, prices fell slightly in London (-0.9 per cent) and the South East (-1.0 per cent), but these small falls have followed a doubling in prices in London and the South East over the past five years.

Martin Ellis, Chief Economist at the Halifax commented, "The regions outside the south of England have seen much more rapid increases in house prices than the south this year.

"The northern regions are likely to continue to lead the way over the coming six months as house prices remain low relative to average earnings in these regions compared to the south, suggesting that there is scope for continuing buoyant conditions in the north.'

The disparity in the housing market has led to a narrowing in the gap between average house prices in the North and South. As a result, the gap between the average UK price in the second quarter of 2003 (£129,443) and London (£218,404) narrowed to £89,000 from a record £95,000 in the first quarter of 2003.

The Halifax expects house price growth to continue nationally except in London and the Southeast. The mortgage lender believed that the current high level of prices in relation to earnings in the south was constraining demand in this part of the country, particularly amongst potential first-time buyers.

Figures show that first-time buyers only accounted for 31 per cent of all house purchases in the first five months of 2003 compared with 38 per cent in 2002. The bank expects the market in the south to "pause for breath during the remainder of the year".