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Housing market rebound starts to run out of steam

HOUSE PRICES continued to rise in January but the pace of growth fell to its slowest level in six months, mortgage lender Halifax said yesterday, reiterating its view that UK property prices would remain flat in 2010.

The monthly survey showed that house prices rose 0.6 per cent on the month in January, taking the annual change further into positive territory of 3.6 per cent.

A combination of historically low interest rates and a shortage of stock has pushed prices up over recent months in spite of continued fragility in the wider economy. However, the weaker January increase suggests that the strong recovery in the housing market is beginning to falter.

Capital Economics’ Seema Shah said: “The housing market is still significantly overvalued. With the economic recovery likely to be too weak to prevent further job losses and household incomes set to come under further downward pressure as fiscal policy is tightened, a second leg to the house price correction is looming.”

The weaker data comes just days after Nationwide reported healthy growth of 1.2 per cent for January and predicted double digit annual growth as early as next month.