On the road to recovery? House prices rise by 0.8% in January after pre-Christmas dip

Published 04th Feb 2011

House prices rose by 0.8 per cent during January as values bounced back after steep falls amid the pre-Christmas snow disruption, figures revealed today.

Mortgage giant Halifax said the average cost of a home in Britain rose to £164,173 last month, but this followed a 1.3 per cent plunge in December as snowed-in buyers stayed away from the market.

Its quarter-on-quarter measure of house prices - seen as a smoother indicator of market trends - registered a drop of 0.7 per cent, according to the group.

Halifax said 2011 house prices would be constrained by consumer caution, with spending cuts and tax hikes hitting confidence.

But it noted that fewer sellers coming on to the market would help support prices by shifting the demand and supply balance.

Martin Ellis, Halifax housing economist, said: '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.'

On an annual basis, house prices were 2.4 per cent lower in January, as measured by the average of the latest three months against a year earlier.

The falls are still far from the hefty declines seen in 2008, when the credit crunch saw quarterly drops of 5 to 6 per cent.

However, recent lending figures from the Bank of England revealed the dearth of mortgages being taken out - with 2010 net mortgage lending falling to its lowest level since records began in 1987.

Howard Archer, chief economist at IHS Global Insight, said today's rise in house prices was unexpected, coming after rival lender Nationwide reported a 0.1 per cent month-on-month fall in January.

He said the hike was partly a correction after the fall in December, adding: 'The 0.8 per cent rise in house prices in January does not materially change our view that house prices are likely to fall by around 5 per cent in 2011 and will end up declining by some 10 per cent from their 2010 peak levels.'

Speculation that the Bank of England may be forced to raise interest rates to combat soaring inflation is also expected to hit house prices, according to Mr Archer.

Source: ' ThisIsMoney '

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