Property price indices in the UK frequently offer a confusing picture of the state of the real estate market as they are subject to regional variations and the type of lending activity, it is claimed.
It is not surprising that Halifax and Nationwide figures for May differ, with the first showing a 0.4% decrease and the latter a 0.5% increase, says Alison Beech, business relationship director at Spicerhaart, the largest independent network of estate agents in the UK and Europe.
‘In the grand scheme of things, these monthly indices should not be taken out of context and based on average house prices they are only showing a difference of around £1,500. Buyers and sellers should take more notice of what is going on in their local area than the overall UK picture presented by these indices,’ she explained.
According to the Nationwide index prices rose 0.5% in May and are now less than 10% below their 2007 peak. While it also reported that the annual rate of house price inflation has dropped from 10.5% to 9.8% and prices are up 12.2% since their February 2009 trough.
The Halifax index though shows prices fell by 0.4% in May, the second successive monthly fall after a drop of 0.1% in April. But its index shows prices are still 6.9% higher than they were a year ago. The average house price is now £167,570, according to the Halifax, which is almost in line with Nationwide’s average of £169,162.
‘The mixed pattern of monthly price rises and falls so far this year is consistent with a slowing market and is in line with our view that house prices will be flat during 2010 as a whole. The relative recovery in house prices in 2009 was driven by a boost to demand from reduced interest rates combined with a lack of properties for sale,’ said Halifax’s housing economist, Martin Ellis.
He added that these factors have lost some momentum in recent months with rising unemployment curbing demand. At the same time, the pickup in market conditions last year has encouraged more homeowners to attempt to sell their property.
‘The recent suspension of home information packs and uncertainty about changes to capital gains tax may also be persuading more homeowners to put their properties on the market,’ added Ellis.
Few analysts believe that the mini property market revival in recent months is sustainable as it is not underpinned by strong fundamentals. They point out that low stock levels and low interest rates are the driving force behind the rebound in house prices and sooner or later these conditions will change.