House prices in the UK rose more than expected last month, leading to the fifth successive rise since the summer but are expected to remain flat next year.
Average property prices went up 1.4% in value during November which means that they have jumped more than £13,000 since their lowest point in April, the latest index from Halifax shows.
Prices were volatile at the beginning of the year, switching between monthly rises and falls amid uncertainty in the economy. But an increase in demand for property, a shortage of supply and a fall in some mortgage rates has helped to five consecutive months of increases, said Martin Ellis, housing economist at Halifax.
The outlook though is likely to be different in 2010. ‘The prospects for the market will depend on how the economy evolves and whether there is a significant increase in the supply of properties for sale. Overall, our view is that house prices will be flat during 2010,’ he said.
Last week, Nationwide reported that the average cost of a UK home rose 0.5% during November but a difference in the samples used in the research means the Halifax rise was much higher.
Others are predicting that property prices will fall in 2010. ‘The continued rebound in house prices is hard to reconcile with the weak economic backdrop, the still-tight mortgage lending criteria and the fact that the market remains overvalued. As a result, once the shortage of property on the market eases, we suspect that house prices will fall again,’ said Seema Shah, a property economist at Capital Economics.
Simon Rubinsohn, Royal Institution of Chartered Surveyors chief economist, believes the outlook is slightly more optimistic. ‘While some measures of house prices appear to be suggesting a slackening in momentum, the latest figures from Halifax point towards a more buoyant picture. The November increase of 1.4% follows gains of 1.1% and 1.5% in the previous two months. On a straight year on year comparison, house prices on this index are now higher than they were a year ago although still 16% down from the high water mark. This compares with the Nationwide index which is 12.5% away from the peak,’ he said.
‘Despite the probable ending of the extended zero rate band for stamp duty at the end of the year, the likelihood is that prices will continue to rise in the early part of 2010. Although the fresh supply of property is beginning to pick up, it is continuing to lag behind the increase in buyer interest which suggests that, at least in the near term, the market will continue to tighten,’ he added.