Halifax has just released its National House Price Index for November 2006. House prices rose by 1.7% in November, with the annual change now at 9.6%. The standardised Average House Price (seasonally adjusted) now stands at £187,995.
There are some signs of a likely cooling in housing market activity over the next few months. The market continues to be supported by strong fundamentals underpinned by a UK economy that has now recorded 57 successive quarters of growth.
Employment - a key factor determining housing demand - continues to rise. The number in employment increased by 56,000 in the three months to September, compared with the previous quarter. A lack of supply also maintains the upward pressure on house prices.
The latest RICS survey reported a fall in surveyors' confidence in the outlook for house sales for the third successive month and buyer enquiries are below the levels seen between May and August. The House Builders' Federation reported an annual fall in the numbers looking at new homes for the third successive month in October.
'Real' average earnings growth has slowed markedly over the past six months. According to the latest ONS figures, annual average earnings growth in September (at 3.9%) was only 0.3% higher than retail price inflation (headline measure of 3.6%). Six months ago, there was a difference of 1.7%. This slowdown in real earnings growth, higher interest rates and a squeeze on households' discretionary income due to higher utility bills, should temper housing demand. In turn, house price inflation should ease over the coming months.
Commenting, Martin Ellis, Halifax Chief Economist, said: "House prices increased by 1.7% in November. The marked slowing in real average earnings growth over the past six months, and a squeeze on households' discretionary income due to the substantial increase in utility bills during the last year, should temper housing demand. As a result, we expect house price inflation to ease over the coming months."
