This was the second successive increase in prices on this measure of the underlying trend and the biggest rise for three years since January 2010 (2.9%). Prices in the three months to January were 1.3% higher than in the same three months a year ago. This was the first rise in this annual measure since October 2010 (1.2%).
However, house prices fell by 0.2% in January. This followed successive rises in November and December.
Encouragingly, housing activity was at its highest for five years, with home sales having increased by 5% in 2012 to 932,000; the highest annual total since 2007 (1,619,000). Sales in the final three months of 2012 were 4% higher than in the preceding quarter on a seasonally adjusted basis.
The industry-wide number of mortgages approved to finance house purchases rose for the fifth successive month in December. Approvals for purchase – a leading indicator of completed house sales – increased by 3% to 55,800 in December. Overall, there was a 19% increase in approvals over the last five months of 2012.
Commenting, Martin Ellis, housing economist, said:
"The signs of improvement in the housing market towards the end of last year continued in January. Prices in the three months to January were 1.9% higher than in the previous three months; the strongest figure in this measure of the underlying trend for three years. Prices were also 1.3% higher than in the same period a year ago, marking the first annual rise for 27 months.
"Market activity has also improved with sales in 2012 at their highest for five years. Rising mortgage approval numbers point to further increases in home sales in the coming months. The Funding for Lending scheme has helped lenders to lower interest rates and improve availability in the past few months. This is likely to have been a factor contributing to the pick-up in both home sales and prices.
"The outlook for the UK economy and house prices, however, is more unclear than usual. Subdued economic growth and pressures on household finances are expected to constrain housing demand. Overall, we expect continuing broad stability in house prices nationally in 2013."
Jonathan Hopper, managing director of the property search consultants Garrington, commented:
“What began as a slight thaw is beginning to feel like the first flickers of warmth. January’s stuttering performance was more than made up for by the housing market’s strong end to 2012. Quarterly growth was up for the second time in a row – and year-on-year growth has returned to positive territory. Clearly one swallow does not a summer make, but the property market is going into 2013 with a spring in its step.
“But while transaction levels in 2012 were the highest for five years, they are still a shadow of their pre-crash levels, which can make the housing data volatile. Underpinning that unpredictable picture are two conflicting forces. The Funding for Lending Scheme is tempting more would-be buyers to take the plunge as lenders are not just cutting rates, but offering more products too - even the high LTV loans they had shunned for so long.
“But with the economy shrinking again, consumer confidence is still in short supply. That’s why buyers are negotiating hard, and outside the hotspots of London and the Southeast, prices will be slow to rise. Buy-to-let investors have returned to the market in force, capitalising on low interest rates and some good value house prices.
“Though the consistent increases in London artificially boost the national average, in many regions there is a growing sense that the worst is past. The recovery is real but not irreversible.”
Ben Thompson, MD Legal & General Mortgage Club, said the following:
"As was to be expected, Halifax’ latest House Price Index indicate a 1.9% growth in the market since December 2012.
“These figures complement our research report into the New Normal in the Housing Market, which predicts the housing market to remain broadly flat until mid-2013, after which house prices should start to climb, reaching their 2007 peak of £227,000 by 2015.
“Such a slow market recovery can be attributed in part to a lack of consumer confidence, alongside restrictive borrowing conditions which are inhibiting further growth in the market. Although in many cases it is actually cheaper to buy than to rent in the current climate, there is still a lack of products available to the majority of first time buyers which would enable them to take that first step onto the ladder.
“Although many lenders are now consciously improving lending criteria, which will in turn help to grow the market, this isn’t something that can be transformed overnight.
“So whilst we are moving in the right direction, all indicators point to full recovery being a fairly long process. In fact, analysis undertaken in the New Normal shows that between 2010 and 2019, house price growth is expected to be 25% - the weakest figure on record since the 1950s."
