January house prices were flat with December prices, although they rose one per cent for the three months to January, according to the latest Halifax House Price Index.
January house prices were up 4.5 per cent compared with January 2006, with the average home rising £7,628 over the year to £197,244. Activity within the housing market still appears to be weakening considerably, with the volume of mortgage
approvals falling 35 per cent year-on-year in the final quarter of 2007, according to the Bank of England.
Furthermore, the Royal Institution of Chartered Surveyors (RICS) reported a drop in first time buyer mortgage
enquiries in 2007. Despite this, the rate of decline has slowed in the past quarter, indicating that the downturn in activity may be stabilising.
The index predicts that house prices will be flat in 2008 and that stable economic fundamentals will support house prices throughout the year. According to chief economist at Halifax, Martin Ellis, "The UK economy recorded its 62nd successive quarter of growth in 2007 quarter four, extending the longest running period of unbroken growth on record."
Furthermore, it is anticipated that interest rate cuts in the near future will help to support the housing market. A reduction is expects this month as well as two further cuts in the next 12 months.
Mr Ellis comments: "The economy is expected to continue expanding during 2008, albeit at a slower pace than in the past two years. Sustained growth should support a strong labour market. The MPC is likely to cut the Bank Rate at least twice in 2008; further supporting both the economy and housing demand."
Employment, which the index cites as "a key driver of housing demand", continues to rise. According to the report, 175,000 more people were in employment during the three months to November compared with the previous quarter, while employment was up 263,000 year-on-year to a record 29.36 million.
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