House prices resumed an upward trend last month, increasing by 1.1% according the latest Halifax survey. The rise partly reverses the 1.6% fall recorded in February and puts the average house price according to Halifax at £168,521; the year-on-year increase in house prices rose to 5.2%.
Martin Ellis from Halifax commented: ‘This was the eighth rise in the past nine months, taking the average price to 9.1% above the low point reached last April.
‘Prices in the first three months of 2010 were 0.6% higher than in the final quarter of 2009. This was smaller than the 3.6% rise between the third and fourth quarters of last year suggesting a slowdown in the trend rate of house price growth.’
But Ellis said that, going forward, increases should be slower: ‘There are signs that an increase in the number of properties available for sale is beginning to reduce the imbalance between supply and demand. This should help to contain the upward pressure on house prices.’
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Ed Stansfield from economists Capital Economics cautioned we may not be out of the woods yet as price rises could be tempered by an increase in supply: ‘With fears of a double-dip recession easing and interest rates set to remain low for the foreseeable future, it is clearly possible that prices rise further in the next few months. Yet anecdotal evidence suggests that a key driver of last year’s recovery in prices, namely the lack of stock for sale, is slowly correcting itself and that should help to reduce the upward pressure on prices.
‘Of course, it is possible that the stamp duty holiday will boost demand over the next few weeks, but previous experience suggests that this is unlikely. In addition, the lack of mortgage credit remains an obstacle… Last year’s house price recovery ran far ahead of the economic fundamentals. That suggests that it is not well founded, as does the poor outlook for employment and the fact that the market remains overvalued. It thus seems likely that at least some of last year’s house prices gains will be given back later this year.’
The Bank of England also chose to keep interest rates at 0.5% for another month this afternoon – Interest rates have now been at 0.5% since March 2009, and analysts do not expect any rate rises soon while the economy, and the property market, continue their recovery.
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