Halifax: House prices fell in February

HOUSE prices fell 0.5% in February, according to the UK's largest mortgage lender. Halifax said the fall eroded gains of 0.8% in January and 1.4% in December. Overall, prices have risen by just 0.8% since July 2004.

Halifax's February figures conflicted with a 0.5% rise reported by building society Nationwide earlier this week.

The annual rate of house price inflation continued to ease, falling from 13.7% in January to 12.1% in February, which is the lowest annual rate since December 2001 (11.7%).

However, the bank said estate agents had seen a 'stabilisation in activity'. And it added: 'This continues the mixed pattern of monthly price rises and falls recorded since last summer and is consistent with a gradual slowdown in house price inflation,' said Martin Ellis, chief economist.

'The continuing slowdown in house price inflation from a peak of 22.1% in July 2004 to 12.1% in February and an overall increase in prices of 0.8% since last July confirm the easing in house price growth.'

Halifax's February figures conflicted with a 0.5% rise reported by building society Nationwide earlier this week.

Halifax argued that the market was stablising because mortgage approvals, as measured by the Bank of England, appeared to have bottomed out, and becasue it had seen a pick-up at its own network of estate agents.

It added that the UK economy remained strong with low unemployment underpinning the property market.

Ellis also said repayments were still affordable. Mortgage payments for the average new buyer were up from a 20-year low of 13% of the borrowers' average gross earnings in September 2003 to 20% now. The increase was due to a series of Bank of England base rate rises since late 2003, which has seen the cost of borrowing increase from 3.5% to 4.75%.

Ellis said the proportion was just above the 19% average for the past 20 years and remained well below the 34% peak in 1990. He also repeated Halifax's expecation that rates would fall later this year.

Property vs shares

A SURVEY has revealed a surge in the proportion of experience investors who think returns from the stock market will beat property.

The Association of Investment Trust Companies found that among active investors, 71% think shares will outperform the housing market compared to 53% in October last year.

However the research also suggested that the wider population has retained loyalty to bricks and mortar, with 40% claiming property is the best way to make returns, the same as in October 2004.