House prices up 9.7%, reports Halifax

Published : 8th September 2014


·        Average house price up £16,000 in a year

·        Property price gains appear to be slowing, says Halifax

·        Prices up 3% in three months, down on 3.5% figure seen a month ago

·        House prices inch up by £197 in August

·        Red hot London and commuter belt market showing signs of cooling

House prices inched ahead in August but some of the steam appears to be coming out of the sellers’ market, according to the latest report from Halifax.

The mortgage lender’s latest index showed house prices up 9.7 per cent in the year to August, down on the 10.2 per cent recorded in July, while the average home climbed just £197, or 0.1 per cent during the month.

Headline house price inflation has been driven by a red hot market in London and the popular commuter belt, but agents report signs of conditions cooling. Yet while momentum eases in London, forecasters tip the property market across the rest of the country to continue picking up, which could eventually see the balance tipped towards sellers there.

For now Halifax pointed to indications that a better balance between buyers and sellers was emerging, with more properties coming onto the market, which should ease the rapid property inflation seen over the past year.

Over the three months to August property prices rose by 3 per cent, lower than the 3.5 per cent figure posted in July.

At £186,270, the average house price on Halifax’s index stands £16,046 higher than it did a year ago.

House prices have risen far faster than wages and the Halifax's house price-to-earnings ratio, which uses the ONS average full-time male salary, stands at 5.01 - and has only been higher during the peak of the 2000s property boom.

Much of the growth in the overall average price has been driven by boom-time conditions in the London property market and popular commuter belt areas.

Agents are now reporting the first signs of cooling in some of these locations, where above asking price offers, sealed bids and gazumping had returned with a vengeance.

House prices: This graph shows how prices have risen in the last 12 months, but slowed in August.

Some forecasters suggest that the rest of the country may now play catch up with London and the South East, narrowing the North South gulf that had emerged in the property market.

Estate agent Savills cut its London forecast recently. It said the capital will struggle to keep up such strong momentum after this year. 

By the end of 2014, it forecasts prices will have risen 15 per cent in London – far higher than the 8.5 per cent originally predicted. Next year it sees that dropping to 5 per cent, with prices flat in the capital in 2016, while much of the rest of the country starts to see stronger growth. 

Howard Archer, chief UK economist at IHS Global Insight, forecast house prices to increase by between 1.5 per cent 2 per cent more by the end of the year, and a further 6 per cent in 2015.

He said: ‘The Halifax data tie in with our view that house prices will keep on clearly rising overall through the coming months, but at a more restrained rate.

‘Buyer interest is likely to stay relatively healthy even if it has come off peak levels, as it should be supported by elevated consumer confidence, markedly rising employment, and still low mortgage interest rates (even if they start to rise by early 2015, they will still be very low compared to past norms).

‘It is also currently being supported by the Help to Buy initiatives. Meanwhile, earnings growth is expected to improve over the coming months despite the current weakness.

‘Even so, some restraint on buyer interest is expected to come from more stretched house prices to earnings ratios, the prospect that interest rates will soon start to rise (albeit gradually) and tighter checking of prospective mortgage borrowers by lenders.’

Halifax’s chief economist Martin Ellis, said: ‘Housing demand is supported by continuing economic recovery, growth in employment, improving consumer confidence and low mortgage rates. 

‘Nonetheless, earnings growth that remains below consumer price inflation, and the prospect of an interest rate rise at some point over the coming months, are likely to curb demand. 

‘There are some signs of an improvement in housing supply, both in terms of more second-hand properties coming onto the market and increased numbers of new homes. These trends, if sustained, should help to improve the balance between supply and demand, contributing to an easing in the pace of house price growth.’