The Halifx House Price Index has shown that house prices in October remained unchanged.
The pattern of price movements during recent months shows that the market has strengthened, but the static level of prices in October suggests that we are not poised for another sustained period of sharply rising property values.
Martin Ellis, chief economist at Halifax, says: House prices were unchanged in October following increases of over 1% in both August and September. The overall pattern of price movements over the past few months shows that the market has strengthened compared with earlier in the year.
Continuing economic growth, the high level of employment and a boost to household sentiment regarding the future direction of interest rates following Augusts base rate cut are all supporting housing demand. This years slowdown in the pace of UK economic growth and the ongoing historically high level of house prices relative to average earnings are, however, expected to curb the recent improvement in housing demand and prevent a marked pick-up in prices.
Key indicators provide further evidence that housing market activity continues to recover. For example Inland Revenue figures show that the number of property transactions increased by 16% between the second and third quarters of 2005.
The number of mortgage approvals to fund house purchase for the third successive month in September, says the Bank of England. The number of loans, at 107,000 on a seasonally adjusted basis, was 24% higher than in September 2004 and was at its highest level since June 2004.
Buyer enquiries for property increased for the fourth successive month in September says the Royal Institute of Chartered Surveyors latest survey, marking the longest run of rising enquiries in two years. Halifax Estate Agents, along with the other agents, have experienced a rise in sales in recent months.
Sustained economic growth, high levels of employment and healthy earnings growth are all supporting housing demand.
The UK economy continues to grow but preliminary Office of National Statistics figures confirm that overall activity expanded at a pace below its long-term average rate in 2005 Q3 for the fifth successive quarter. The quarterly rise of 0.4% was slightly below the 0.5% increase in Q2. Annual Gross Domestic Product growth, however, increased from 1.5% in Q2 to 1.6% in Q3. Historically, the UK economy has grown at an average rate of 0.6% a quarter and 2.5% per year.
Despite the slowdown in economic growth over the past year the number of people in employment has continued to rise, reaching a record level of 28.76 million in the three months to August 2005. This was 103,000 up on the previous three months and 345,000 higher than a year earlier.
Average earnings increased by 4.2% in the three month to August 2005, comfortably exceeding the 2.5% rise in consumer prices in the year to September 2005.