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Slowing house price figures may be false dawn

  • 10/03/2003
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House price growth eased to its slowest rate of increase since October 2001, according to the latest...

House price growth eased to its slowest rate of increase since October 2001, according to the latest monthly figures from Nationwide.

This slowdown contrasted with the latest monthly figures from Halifax, which found an increase of 1.7% in February. It reported finding very little impact from either Christmas or the impending conflict, although it predicted this growth would slow by the end of the year.

Nationwide found the monthly change in house prices increased just 0.4%, although at £118,521, the average house price is still up 25% on the same period last year.

The slowdown was 0.3% higher than that of housing market information firm, Hometrack, although it appears to confirm the view that worries over the possible conflict with Iraq are depressing price increases.

Nevertheless, Alex Bannister, group economist for Nationwide, said there have been several false sunsets in recent years and each proved premature.

Bannister said: ‘Over the last few years there have been three false sunsets for the housing market. Each false sunset has seen consumer confidence and anecdotal/survey information turn significantly negative ‘ but none led to a slowdown. The first was at the end of 1998, when recession was predicted for 1999, the next in 2000 and the final one in autumn 2001 following the US economic slowdown and 11 September.’

However, in its own report the British Bankers’ Association (BBA), disagreed with Halifax finding the current slowdown likely to be a hangover from Christmas, with small increases in mortgage lending in January matched by significantly higher spending on credit cards and overdrafts.

David Dooks, director of statistics at the BBA, said: ‘These latest figures reflect the fact that consumers are financially aware of the many options available for personal borrowing, which they pick and choose to suit their circumstances.’

Bannister also predicted that growth would slow further this year as buyers will find it increasingly difficult to raise a deposit.

‘Our house price inflation forecast of 10% for December 2003 was predicted on a weakening outlook for real take-home pay growth. In line with our expectations pay settlements and bonuses have been weak at the start of the year and by April the 1% hike in National Insurance contributions will also impact on pay packets,’ said Bannister.


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