House Prices Spring to Life

House prices bounced back in February, according to the Halifax?s latest data. January saw prices falling for the first time in eight months, casting a shadow of uncertainty across the property market. But the Halifax recorded an increase of 1.4% in February which more than reverses January?s 0.2% fall.

February?s rise is the strongest since last August and house price inflation is at its fastest pace in nine months, says the report. Buyers are also in a less dominant position: ?The number of new buyer enquiries increased for the eighth successive month in January, according to the latest RICS survey,? said Martin Ellis, Chief Economist for the Halifax, ?The stock of available property for sale also fell to a 15 month low, marking a continuing shift in the balance between buyers and sellers with buyers now in a less dominant position than during much of 2005.?

However independent property economists suggest that the strong monthly rise may simply be volatility ? a feature of a soft market. According to Kelvin Davison from Capital Economics, favourable base effects account at least part for the increased headline rate of house price inflation in February. Mr Davidson also notes that mortgage approvals failed to increase in February, the first time since November 2004 ? a factor which when coupled with the weakening labour market and stretched affordability, could limit the scope for a sustained upturn in house prices.

On the other hand, new buyer enquiries and site visits continue to increase ? a sign that the market will steadily improve. The Halifax estimates that UK house prices will rise by 3% in 2006, broadly in line with the predicted rise in retail price inflation. The annual rate of house price inflation is, nonetheless, expected to increase over the next few months as modest price rises compare with slight falls in early 2005.