Assetz® News - Flat January starts a flat year, says Halifax

Flat January starts a flat year, says Halifax

5th February 2008 |

Maybe it is just as well today is Shrove Tuesday, for according to Halifax property prices this year will be as flat as a pancake.

This was the verdict given by the bank's chief economist Martin Ellis today after it published its January House Price Index. Like Nationwide, Halifax has been predicting such a situation for months, although one may wonder if every month can match this forecast as precisely as January did, coming in at exactly 0.0 per cent.

December certainly told a different story, with a 1.3 per cent increase in prices following three successive declines. Perhaps the most relevant fact, however, emerges from the previous occasion when a house prices survey recorded a sudden jump in prices of over one per cent.

This occurred in October 2007 when Nationwide, just like Halifax in December, produced figures at odds with other surveys by recording a 1.1 per cent rise. However, in November it then came up with a 0.8 per cent drop. Taking the two together, Nationwide chief economist Fionnuala Earley said: "Monthly data can be volatile and the sharp fall this month is partly a reflection of the strength recorded last month and in November last year. A better picture of the underlying trend is captured in the three-monthly growth rate."

By comparison, the Halifax data over the last couple of months therefore looks more favourable. Furthermore, Nationwide's own figures for January only produced a slightly different figure, a 0.1 per cent drop compared to 0.4 per cent fall in December, when the disparity was highly apparent.

Given this apparent near-agreement between the two lenders and their forecasts for 2008, it is tempting to suggest that the property market may have bottomed out, which could interest buy-to-let investors as well as first-time buyers.

While not forecasting growth for this year, Mr Ellis certainly believes that any factors which could potentially cause a fall in prices will be counteracted by the persistence and even growth of positive factors.

He stated: "Sound economic fundamentals will support house prices in 2008", listing high employment rates, 62 successive quarters of gross domestic product growth and the prospect of at least two base rate cuts as the factors which will boost the housing market and restrict economic slowdown.

That the next base rate cut is probably going to happen this week is a view held by the overwhelming majority of economists. Unanimous forecasts of a 0.25 per cent rate cut by the seven economists polled by Adfero and the 60 contacted by Reuters last week have been matched by 58 of the 61 questioned by Bloomberg. Of the other three, two tipped a 0.5 per cent rate and just a single one forecast a hold decision. If the property market's stability depends on rate cuts, then it appears this process will take a step forward two days from now.