Login to UKBP
Commercial Property News
Base Rates remain at 5% as the housing market dives more steeply than during 1990's slump.
On a day when the MPC has voted to keep Base Rate at 5% the Halifax has revealed the biggest monthly drop of 1.7% since December 1992 in UK House prices, in line with those reported recently by Nationwide. Howard Archer, chief UK economist at Global Insight, said the drop was sharper than any seen during the early-1990's housing downturn and it was "odds-on" that the market would continue to fall.
Despite the current turmoil, Halifax said the housing market continued to be underpinned by strong fundamentals.
The bank said demand from home buyers had been "significantly curbed" by the lack of mortgage funds, high prices and the squeeze on household finances.
"Pressure on householders' income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers' ability to enter the market,This is resulting in both lower prices and activity levels" said the Halifax's economist Suren Thiru.
But he added: "A solid labour market, low interest rates and a shortage of new houses continue to support the market. The labour market is the key driver of the housing market and the number of people in employment is at a record high."
However commentators at Capital Economics said it was the first time annual house price falls on the index had entered double digits since it was launched in 1984, and that the figures for the past three months showed prices had fallen at a rate of 20% a year.
They described Halifax's figures as "dire", adding: "With the housing market still plagued by tight lending criteria, falling buyer confidence and now a rapidly weakening economy, the end for this housing market correction remains a long way off."
Halifax refused to confirm that annual price falls had reached record levels, stating that its method of calculating annual changes showed a clearer picture of what is happening in the market.
Since December 2002, instead of comparing months directly Halifax has taken an average over three months and compared it with the same period of the previous year. As a result, it is quoting an 8.8% fall in prices year on year.
A spokesman said this method "captured the underlying trend of house price movements". He added that any fall over the past year needed to be viewed in the context of several years of rising prices.
"July's figures are compared with a period when house prices were rising quite steeply. Our index peaked in August so you are comparing two periods either side of that," he said.
Despite the current turmoil, Halifax said the housing market continued to be underpinned by strong fundamentals.
The bank said demand from home buyers had been "significantly curbed" by the lack of mortgage funds, high prices and the squeeze on household finances.
"Pressure on householders' income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers' ability to enter the market,This is resulting in both lower prices and activity levels" said the Halifax's economist Suren Thiru.
But he added: "A solid labour market, low interest rates and a shortage of new houses continue to support the market. The labour market is the key driver of the housing market and the number of people in employment is at a record high."
However commentators at Capital Economics said it was the first time annual house price falls on the index had entered double digits since it was launched in 1984, and that the figures for the past three months showed prices had fallen at a rate of 20% a year.
They described Halifax's figures as "dire", adding: "With the housing market still plagued by tight lending criteria, falling buyer confidence and now a rapidly weakening economy, the end for this housing market correction remains a long way off."
Halifax refused to confirm that annual price falls had reached record levels, stating that its method of calculating annual changes showed a clearer picture of what is happening in the market.
Since December 2002, instead of comparing months directly Halifax has taken an average over three months and compared it with the same period of the previous year. As a result, it is quoting an 8.8% fall in prices year on year.
A spokesman said this method "captured the underlying trend of house price movements". He added that any fall over the past year needed to be viewed in the context of several years of rising prices.
"July's figures are compared with a period when house prices were rising quite steeply. Our index peaked in August so you are comparing two periods either side of that," he said.
Thu, 7th Aug 2008