The path to house price equilibrium is an undulating one.
After a 1.9 per cent spike in January the average cost of a house fell by 0.3 per cent month-on-month in February, according to the latest data from Halifax.
This put the price of the average home slightly lower at £192,372, with some analysts suspecting a rise in buyer uncertainty is behind the fall as the general election draws closer.
This small correction to January’s jump brought the annual rate of growth down to 8.3 per cent, lower than the 8.5 per cent in January, but still higher than December’s rate of 7.8 per cent.
The peak of 10.2 per cent annual growth seen last July remains out of reach in the residential market ether. Charlie Wells, managing director of buying agency Prime Purchase, said the looming election would likely put off some buyers who fear making any investment before more certainty returns.
Why it’s interesting
Looking at individual reports rarely gives an accurate view of the overall market, because of the propensity for high month-on-month volatility. When viewed close up you get market pixelation, where what seem like important details blur the bigger picture. The latest two reports from Halifax illustrate this perfectly.
What is the bigger picture? Home sales can give us a clue; according to HMRC figures they have fallen for four months in a row. Sales for the three months to January were 2.5 per cent lower than for the preceding three months. Mortgage approvals in January, on the other hand, were up again; Bank of England data showed approvals hitting 60,786, after rising in December for the first time in five months.
This paints a picture of a market behind rising in the mid and long term, even if the odd month shows a drop. Rises in 2015 are expected to be much more muted than in 2014, however: perhaps around five per cent.
What the analyst says
Howard Archer of IHS global insight said:
We suspect that housing market activity is now gradually turning around after losing appreciable momentum from the early-2014 peak levels, and we see activity it picking up modestly as 2015 progresses.
This suspicion is supported by the Bank of England reporting that mortgage approvals for house purchases rose modestly for a second month running in January after being at a 17-month low in November.
Consequently, we expect house prices to rise around five per cent in 2015. This compares with the peak double-digit annual house price increases seen earlier in 2014.
The general election will likely skew the first half of the year but, with interest rates low and stamp duty changes helping buyers there is no reason to fear prices dropping through the rest of the year.