Print friendly version 8 Apr 2008

Sharp fall in house prices recorded in March

House prices fell by 2.5% in March, according to Halifax, and prices were 1% lower in the first quarter than in the last quarter of 2007.

The Halifax House Price Index, published today, revealed house prices rose by 1.1% on an annual basis bringing the average house price to £191,556. The biggest price increases were in Greater London (1.6%), East Anglia (1.4%) and East Midlands (2.2%). However, the largest falls were recorded in the West Midlands (5%) and Wales (4.7%).

Martin Ellis, chief economist at Halifax , said the lender had forecast a modest fall in UK house prices this year. “Any declines, however, should be viewed in the context of the significant price rises over recent years,” he added.

“The average UK price has risen by £120,860 during the past decade from £70,696 to £191,556; an increase of 171%.“Sound economic fundamentals are supporting house prices. A strong labour market, low interest rates and a shortage of new houses underpin housing valuations. Our research shows that the labour market is the key driver of the housing market. Employment is at a record high and unemployment continues to fall.”

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: “The sharp fall in the Halifax House Price Index in March highlights the growing pressure on the residential market as lenders continue to scale back their activity in the market. Loan-to-value ratios are being lowered at the same point as borrowing rates are being raised putting increasing pressure on first-time buyers who are having to find ever larger deposits.

“The Bank of England could respond to growing fears about the impact of the credit crunch and the worsening state of the property market by cutting interest rates on Thursday [10 April]. Even so, we suspect that any immediate benefit for new home buyers is likely to be limited.”

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