The latest Halifax House Price Index for July 2006 highlights the following key points:
* House prices increased by 0.2% in July following successive declines in May and June. This mixed pattern of monthly price rises and falls is a typical feature of a more stable housing market.
* Technical factors have, as expected, contributed to a pick-up in annual house price inflation in 2006. Additionally, the strengthening UK economy and improved buyer confidence gave the housing market more momentum than expected in the first half of 2006.
* Sound fundamentals, underpinned by a strengthening economy, high employment levels and low interest rates, will continue to support housing demand in the second half of 2006. The annual rate of house price inflation, however, is expected to ease, partly because the corresponding figures last year were strong. Pressure on householders' finances from utility bill and council tax rises, and speculation of higher interest rates, are also likely to moderate demand, causing house price inflation to decline.
* Activity has stabilised in recent months with the number of loans approved for house purchase down 2% in 2006 Q2 compared with Q1, on a seasonally adjusted basis, according to the latest Bank of England figures.
Commenting, Martin Ellis, Chief Economist, said: "House prices increased by 0.2% in July following successive declines in May and June. This mixed pattern of monthly price rises and falls is a typical feature of a more stable housing market. Overall, house prices have increased by only 0.9% in the past four months compared with a 3.3% rise in the preceding four months. Sound fundamentals will continue to support a healthy housing market over the remainder of 2006. Nonetheless, we expect the annual rate of house price inflation to ease, partly because the corresponding figures last year were strong. Increased pressure on householders' finances and mounting speculation of interest rate rises are also likely to curb demand."
