Halifax reveals 3.6 per cent house price fall

UK house prices have slumped by 3.6 per cent last month, according to the Halifax House Price Index, which is the biggest monthly drop since figures were first compiled in 1983.

Halifax said an increase in properties on the market, combined with a drop in demand fuelled by economic uncertainty, have forced prices down.

Halifax housing economist Mark Ellis said it is too early to say whether last month’s fall represents the beginning of a sustained period of declining house prices.

He added: “Looking at quarterly figures – a better measure of the underlying trend – house prices in the third quarter of 2010 were 0.9 per cent lower than in the second quarter of 2010.

“This rate of decline is significantly slower than the quarterly changes of between minus 5 per cent and minus 6 per cent that were seen in the second half of 2008.”

Despite the fall in house prices, the Halifax says the prices are still higher than a year ago, with figures up by 2.6 per cent on last year.

Prospects for the housing market remain uncertain according to Mark Ellis.

He said: “Earnings growth is expected to be very modest over the next year, tax rises are on the way and more people are putting their homes on the market. These will all be constraints on the market, dampening house prices.”

'Monster' fall in house prices
What a monster of a figure. A 3.6 per cent fall in house prices in one month. That is off the scale. I was not aware that such a fall was even feasible. It has never happened before in the entire history of the landmark Halifax House Price Index, since it started in 1983.
The sharp correction in 2008 saw the monthly falls trough at 2.6 per cent, so September 2010 saw absolute carnage in the housing market.
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House price figures contrast
The Halifax figures contrast with Nationwide’s numbers published last week which showed house prices slightly higher by 0.1 per cent in September.

Although the monthly figure between the two building societies differs, the quarter-on-quarter decline for the two groups was exactly the same at 0.9 per cent.

Chief UK and European economist at HIS Global Insight, Howard Archer, said the Halifax figures are “at face value, an absolute shocker”, but he claimed it is important to put them into perspective.

He said the data highlights how volatile housing figures can be on a month-on-month basis and it is best not to attach too much importance to the one piece of data.

He said: “Rather than crash, we expect house prices to trend down relatively gradually over the final months of 2010 and in 2011 to lose around 10 per cent in value.

“There is however likely to be significant volatility around this gradual overall downward trend.”

Industry-wide figures published by the Bank of England recently showed the number of mortgage approvals for house purchase during August fell to 47,372. It was the lowest level in six months, which economists point out is consistent with falling house prices.

According to Halifax, low interest rates, currently held at 0.5 per cent, have improved the affordability of houses.

Halifax also said mortgage payments for new borrowers have fallen from 48 per cent of average earnings in 2007 to 30 per cent in 2010. It claims the average home now costs £162,096.

Shares in Barratt Developments, Redrow and Taylor Wimpey, Lloyds Banking Group and the Royal Bank of Scotland were all down following the release of Halifax’s figures.