House prices increased by 1.8% in February, leaving the annual rate unchanged at 9.9% for the third consecutive month according to the Halifax, although it says the rate of growth on a quarterly basis has halved.
The three interest rate rises since August appear to be having an effect on demand for housing, although Halifax says we are yet to see this effect on house prices themselves. Mortgage approvals were down in January from a peak in November last year, and new buyer enquiries also fell after Christmas the report found.
But overall a shortage of supply continues to push up prices: ‘The market remains very tight with low supply,’ said Martin Ellis, Halifax Chief Economist. ‘This exerts upward pressure on house prices despite the easing in demand.’
Other factors which could ease inflation are the growth rate of average earnings ? which is currently slower than retail price inflation ? as well as rises in Council tax and further interest rate increases, Mr Ellis said.
Looking ahead to the Budget, Mr Ellis also sought to draw attention to the high levels of revenue currently generated by property taxes, which Halifax says are the highest in the OECD. The lender has called on the Government to raise stamp duty thresholds and the inheritance tax threshold in line with the increase in house prices over the past decade, and for it to commit to index link them to house prices in the future in an effort to redress the imbalance between house prices and tax thresholds.