House prices fell by 0.5% in October, says the Halifax. Overall, house prices in the three months to October were 0.3% higher than in the previous quarter. This continues the steady downward trend experienced since the end of 2006. The annual rate of house price increase fell to 8.9% in October from 10.7% in September. The annual rate should decline further over the next few months as the strong monthly house price gains during the autumn of 2006 drop out of the year-on-year comparisons.
Activity is declining, with mortgage approvals to fund house purchase down by 6% in September and approvals in 2007 Quarter 3 were 11% lower than in 2006 Quarter 3. New buyer interest in purchasing a house fell for the tenth consecutive month in September, demonstrating that potential buyers have become more cautious.
Commenting, Martin Ellis, Halifax chief economist, said: "House prices fell by 0.5 per cent in October. Prices in the three months to October were 0.3% higher than in the previous quarter - a good guide to the underlying trend - continuing the steady easing in house price growth since the end of 2006. The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity. The UK economy is in a strong position. Sound market fundamentals, including high levels of employment and a shortage in the number of properties available for sale, will continue to support house prices."
Overall, house prices in the three months to October were 0.3% higher than in the previous quarter. This continues the steady downward trend since the end of 2006. House prices in the first three months of 2007 were 3.0% higher than in 2006 Quarter 4.
The stock of unsold property on estate agents' books fell in September to the lowest level since May 2005. Continuing supply shortages of both second-hand properties for sales and an ongoing failure of the rate of housebuilding to match the pace of new household formation will also support house prices.
October's fall follows a 0.6% decrease in September. A mixed pattern of monthly price rises and falls is a typical feature of a more subdued housing market. For example, there were six monthly falls and six monthly increases between July 2004 and June 2005 as the market slowed in response to a series of interest rate rises during 2004. It is not unusual to see successive monthly falls in these circumstances.
The annual rate fell to 8.9% in October from 10.7% in September. The annual rate fell for the second successive month - from a peak of 11.4% in August - bringing the annual rate back to single figures for the first time since February 2007. The annual rate should decline further over the next few months as the strong monthly house price gains during the autumn of 2006 drop out of the year-on-year comparisons.
