House prices in the three months to January were 0.7% lower than in the preceding three months. This continues the slight decline on this measure since last spring.
The pace at which prices are falling, however, remains markedly lower than during the second half of 2008 when quarterly declines of 5-6% were recorded.
On an annual basis, prices in January were 2.4% lower as measured by the average for the latest three months against the same period a year earlier.
Fewer properties coming onto the market for sale. The latest RICS survey, for example, reported a decline in new seller instructions for the third successive month in December. A continuation of this trend would help to reduce the imbalance between demand and supply and support house prices.
Slight rise in housing market activity in 2010. The number of home sales in the UK increased by 4% from 846,000 in 2009 to 884,000 in 2010, according to the latest HMRC figures. Despite this modest improvement, sales remain very low historically and are just over half the annual levels of 1.6-1.7 million in 2006 and 2007.
Latest mortgage approval figures affected by the weather. Bank of England industry-wide figures showed a 10% decline in the number of mortgages approved to finance house purchase – a leading indicator of completed house sales – between November and December on a seasonally adjusted basis.
These figures, however, are difficult to interpret due to the unusually severe weather in December, which is likely to have reduced the level of approvals in that month.
Similarly, the 28% fall compared with December 2009 is significantly affected by the ending of the stamp duty holiday on properties between £125,000 and £175,000 at the end of 2009, which boosted the number of approvals during the last few months of that year.
Commenting, Martin Ellis, housing economist, said:
"Prices in the latest three months were 0.7% lower than in the previous quarter, continuing the slight downward trend on this underlying measure. House prices increased by 0.8% between December and January.
"We expect limited movement in house prices overall this year. There are, however, likely to be some monthly fluctuations with the risks on the downside. The prospects for the market in 2011 are closely aligned with the performance of the wider economy. Consumer confidence has fallen recently, partly as a result of nervousness about the economic outlook.
"On a positive note, there have been further signs that the recent downward trend in prices is causing homeowners to be more reluctant to put their properties on the market. This development should help to relieve downward pressures on prices as long as it is sustained.
"We also expect interest rates to remain very low for some time, supporting a favourable affordability position for many existing mortgage borrowers and those entering the market."
Mark Blackwell, managing director of property data conduit xit2 said:
“The Halifax index is working with a small sample taken from a tiny market. There were less than 40,000 transactions in January and that means none of the usual indexes are as reliable as they should be. They’re just too volatile to draw meaningful conclusions from monthly statistics.
"Having said that, it’s clear the housing market is bumbling along at the moment - and it looks as if prices aren’t going to rise any time soon. Prices are threatened from a potential hike in the Bank Rate this spring. Not only would that punish existing owner, it would also land a savage psychological blow on potential buyers.”
