Monday, 13 April 2015 00:00

House price growth continues to slow

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Inching up: House prices are up another 8.1 per cent over the past year, according to Halifax Inching up: House prices are up another 8.1 per cent over the past year, according to Halifax

House price growth continues to slow - but the average home still earned a respectable £788 in March alone

  • Average house is now worth £182,970
  • Prices rise by 0.4 per cent in March
  • Number of properties coming on to the market remains low  
  • Short supply of homes for sale fails to meet demand

House prices inched up another 0.4 per cent in March as the supply of new homes on the market remained tight ahead of the General Election.

The average house price now stands at another record high of £192,970 – up another £788 over the past month alone, the latest figures from Halifax reveal.

Although prices have cooled considerably from the frenzied months seen last year across the country, demand remains high thanks to rock-bottom mortgage rates and last December's stamp duty changes.

Many families are enjoying a return to real earnings growth for the first time in several years, which is also increasing demand in the housing market.

Viewed across the year prices were up by 8.1 per cent on average, which is still a very strong rate of growth although slightly down on the 8.3 per cent seen in February and comfortably below last July's peak of 10.2 per cent.

Halifax predicted that in time other factors will start to weigh on the market, such as an unsustainably growing chasm between average earnings and house prices.

Halifax housing economist Martin Ellis said: 'The rising level of house prices in relation to earnings should, however, curb house price growth and activity. The annual rate of house price growth, which has continued to ease in the first quarter of 2015, is forecast to end the year at 3-5 per cent.'

Demand remains high thanks to a low supply of new homes on to the market.

New instructions fell again in February, according to the latest Royal Institution of Chartered Surveyors report , and have been falling for the past seven months with the exception of January.

Commentators have suggested homeowners are now waiting to put their properties up for sale until after the General Election, when there should be more certainty around housing policy that could affect the market.

Prime buyers in particular are sitting on their hands as Labour party leader Ed Miliband has talked of bringing in a mansion tax, which would hit new owners of properties worth more than £2million should he win the vote.

Political parties have also made differing pledges on house building targets and other policies to help struggling first-time buyers to get on to the property ladder, all of which could affect prices and demand.

Borrowers' appetite for mortgages decreased significantly in the first quarter of the year, the Bank of England reported on Wednesday, which means lenders have seen demand fall more sharply than at any point since the financial crisis in 2008.

By a balance of -40.8 per cent, lenders said demand had fallen between January and March.

Lenders put the recent falls in demand for mortgages down to concerns about housing affordability and uncertainty about the outlook of the housing market.

Despite the fall in demand, there were signs in the survey that lenders are willing to loosen the purse strings. Banks and building societies said they have become more willing to lend to people with deposits below 10 per cent.

What's more, lender said they expected mortgage rates, which have already been chopped to some of the lowest levels ever offered, to edge down further. They expected to see a significant narrowing in their profit margins on mortgages and a further slight reduction in mortgage fees in the next three months.

However, a balance of lenders reported that their maximum loan-to-income ratio had fallen in the past quarter, reducing the amount that borrowers can take out.

Howard Archer, chief UK and European economist at IHS Global Insight, echoed the Halifax forecasts to predict house price growth of around five per cent across 2015.

He said: 'We suspect that housing market activity is now turning around gradually after losing appreciable momentum from the early-2014 peak levels, and we see activity picking up modestly over the coming months.'

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