News

House prices come off the boil

The Sunday Times - Money section 26th December 2004

Homeowners have enjoyed another year of double-digit growth in the value of their properties.  Annual house-price growth for the typical property has dropped from more than 22% in the summer to 16.8% in November, according to Halifax.  The bank experts growth for 2004 as a whole to be 16%.  Nationwide building Society is slightly more pessimistic, with a forecast of between 13% and 14%. 

The first six months saw continued price rises before the market turned in July.  Since then, prices have fallen 2.5%.  The housing market started the year in robust form.  Prices had soared 11.5% by June, according to Halifax.  The average property had gone up from £142,408 to £159,685 - a profit of £17,277 in just six months.  Experts said the surge was largely due to the return confidence in London and the Southeast.  The market in the capital was hit hard by the Iraq war and fears of terrorism in 2003, but by the start of this year buyers had started to return.  Liam Bailey at Knight Frank, an Estate Agent, Said: ''2003 was a difficult year in the southeast and East Anglia because of Global events.  In addition, many prospective buyers held back because they though prices would fall.  When they didn't, a lot of people came back into the housing market.''  The early surge in the housing market was so unexpected that a number of commentators raised their 2004 forecasts.  Halifax upped its prediction for house-price growth form 8% to 16% in June; Nationwide raised its forecast from 9% to 15% in March - although it has since reduced it again.  However, the market started to turn in the summer as the Bank og Englands interest-rate rises started to bite.  The bank hiked interest rates four times this year, from 3.75% - 4.75%.  The first quarter-point rise came in February, but it was the following three - in May, June and August - That really took the heat out of the market.  Ray Boulger of Charcol, a Mortgage Broker, said: ''The most surprising thing about the marked slowdown in the housing market in the second half of the year has been its speed. The key influence has undoubtedly been three base-rate rises over Summer.''  Miles Shipside at Rightmove also blames the Bank of England for the slowdown.  He said:  ''It is no wonder that the life has beened squeezed out of the market.  By October this year it was costing £180 a month more to buy the average home than it was in December 2003 - that's a jump of 37%.''