Halifax survey confirms UK house prices not only stabilised but rising

(Alliance News) - A second consecutive monthly rise in the Halifax US house price index in November has confirmed prices have not only stabilised, but are rising, according to Capital Economics on Thursday.

The average house price index increased 0.5% in November from October. Prices had increased from an upwardly revised 1.2% in October from September.

On an annual basis, prices were 1.0% lower, easing from a 3.1% fall in October. The year-on-year reading for October was nudged higher from an initially reported 3.2% fall. The data from October had initially showed prices rose 1.1% on-month.

Halifax said South East England continues to see most downward pressure on house prices.

Capital Economics analyst Imogen Pattison commented: "While a shallow recession and a rise in unemployment next year may cause a further modest fall in house prices, with the peak in mortgage rates behind us, prices may well have already bottomed out.

The research house said the Halifax read mirrored the increase in the Nationwide index.

On Friday last week, new data from Nationwide showed UK house prices rose by 0.2% in November from October on a seasonally adjust basis, with growth slowing slightly from a 0.9% on-month rise in October. On an annual basis, prices were 2.0% lower in November, slowing from the 3.3% fall in October.

Halifax said the typical UK home cost GBP283,615 in November, around GBP1,300 higher than in October. Meanwhile, Nationwide said last week that the average house price, without seasonal adjustment, was GBP258,557 in November, down from GBP259,423 in October.

"The Halifax index has tended to react more strongly than the Nationwide to changes in mortgage rates. So the recent fall in mortgage rates from 5.9% in July to around 5% now probably explains this rise and suggests that despite stretched affordability, demand has recovered somewhat. Indeed, the rise in mortgage approvals in October suggested we are past the low point in mortgage lending," said Capital Economics' Pattison.

"That said, as we expect mortgage rates to stay around 5% until we near the first bank rate cut in autumn next year, there may yet be some further weakness in prices with the economy likely to fall into recession and unemployment to tick up."

Halifax Mortgages Director Kim Kinnaird said: "The resilience seen in house prices during 2023 continues to be underpinned by a shortage of properties available, rather than any significant strengthening of buyer demand. That said, recent figures for mortgage approvals suggest a slight uptick in activity levels, which is likely as a result of an improving picture on affordability for homebuyers. With mortgage rates starting to ease slightly, this may be leading to increased buyer confidence, seeing people more inclined to push ahead with their home purchases.

Capital Economics' Pattison added that the partial reversal of previous house price falls leave prices only around 3% below their August 2022 peak.

"While we are expecting a further 1.5% drop in prices next year, the resilience of households so far to higher mortgage rates, particularly reflected in the last three readings on the Nationwide index, does suggest the risk to our house price forecast is to the upside," said Pattison.

Looking ahead, Halifax's Kinnaird commented: "The economic conditions remain uncertain, making it hard to assess the extent to which market activity will be maintained. Other pressures – like inflation, the broader cost of living, overall employment rates and affordability – mean we expect to see downward pressure on house prices into next year."

By Greg Rosenvinge, Alliance News senior reporter

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