House prices up 1.8% in October

House prices increased by 1.8% in October, but prices are still 2.3% lower than at the end of 2009, the latest Halifax House Price Index shows.

The average house price now stands at £164,919.

Prices in the three months to October were 1.2% lower than in the preceding three months.

Halifax says house price data on a quarterly basis provides a clearer indication of the overall market trends.

The underlying pace of house price growth has turned moderately negative in recent months. The rate of decline, however, is significantly lower than the quarterly rate of decline of -5% to -6% during the second half of 2008.

Martin Ellis, housing economist at Halifax, says there has been a very mixed picture of monthly house price rises and falls throughout 2010, which continued in October with prices rising by 1.8% following September’s decline, reflective of flat house prices.

He says: “The rate of decline in prices on the three month-on-three month measure is markedly less than the quarterly declines of more than 5% recorded during the second half of 2008.

“An increase in the number of properties available for sale in recent months, together with a decline in demand, has put some downward pressure on prices in recent months.

“We do not believe that prices are set to fall sharply over a sustained period. Interest rates are likely to remain very low for an extended period, which will continue to support the improved mortgage affordability position for homeowners. Low rates and stable employment levels are benefiting homeowners.”

Paul Diggle, property economist at Capital Economics, says: “October’s rise in the Halifax house price index was widely expected, given the size of the previous month’s drop. Moreover, although far stronger than consensus estimates for a 0.6% rise, the underlying trend still points to accelerating house price falls.

“Prices were up by 1.8% month on month following September’s plunge of 3.7%, revised from 3.6% in the original estimate. The Halifax’s headline rate of house price inflation, a three monthmoving average of the year-on-year rate which smoothes out short-term volatility, worsened again to 1.1%, down from 2.7% last month.

“Looking through the short-term volatility, the bigger picture is that house prices are falling. With the economic recovery set to slow next year and recent job creation likely to go into reverse as the full effect of the fiscal contraction hits home, we expect house prices to fall further