House prices down 1.3% in December

10 January 2011 | By Natalie Thomas

House prices fell 1.3% in December, according to the latest Halifax House Price Index.

The average house price is now £162,435.

Prices in the final three months of 2010 were 0.9% lower than in the previous quarter. This rate of decline is significantly less than the quarterly falls of 5-6% during the second half of 2008.

Martin Ellis, housing economist at Halifax, says: “Looking forward, we expect limited movement in house prices during 2011 but with the risks on the downside. Interest rates are likely to remain very low for some time.

“This will continue to support a favourable affordability position for those entering the market and limit financial pressure on existing homeowners to sell. Current signs that homeowners are becoming more reluctant to sell would, if continued, help reverse the imbalance between buyers and sellers.

“Nonetheless, uncertainty about the economy, weak earnings growth and higher taxes could put some downward pressure on demand.”

Philip Clarke, a director of property consultants, Fisher Property Services, says the December figure will dampen spirits but he does not expect falls like this to continue throughout 2011.

He says: “During 2011 we are likely to see a further divergence in the the fortunes of the North, South and London. We expect prices in the South and London to be resilient over the course of 2011, with the capital even seeing a marginal increase in prices come the end of the year. But for the North, with its heavy reliance on the public sector and industry, and the geographic dilution of demand, further price falls are almost inevitable.

“With a significant number of people apparently paying their mortgages each month on their credit cards, an interest rate rise would be the coup de grace for many borrowers. Many households, unable to remortgage, are sitting exposed on SVRs.

“But with the ongoing fragility of the economy, the VAT hike, rising unemployment and decimated consumer confidence, we cannot see the MPC raising Bank Rate during 2011, despite the tangible threat of inflation. The risks remain to the downside.

“When rates do eventually rise, we are likely to see a significant rise in defaults, which will place further downward pressure on prices.

“Until the economy is on a firmer footing, confidence has returned and mortgage finance more readily available at higher LTVs, we are unlikely to see a recovery of any depth in the property market.”