House price rises 'do not signal property boom'
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Your support makes all the difference.Halifax Bank said yesterday that Britain had not embarked on another property boom despite a 1.5 per cent rise in house prices last month.
The increase was the largest since February and meant house prices have risen, on average, by 1.3 per cent a month this year. The rise contrasted with figures showing that manufacturing industry suffered its sixth successive monthly slump.
But Halifax, the UK's largest mortgage lender, said a fall in the number of first-time buyers meant that annual house-price inflation would fall from 23 per cent now to 9 per cent by the end of the year. "The market is going from a gallop to a canter," said Martin Ellis, its chief economist. "Just because it has come back in May does not mean this pace will carry on."
Halifax admitted that it had been surprised by the strength of the housing market. The typical monthly rise of 1.3 per cent is well above the long-run historical average of 0.6 per cent a month, which Mr Ellis said would probably become the norm by this time next year.
The annual rate of price increases decreased from 23.6 per cent in April to 22.7 per cent last month, which was the lowest rate since August last year.
Mr Ellis said: "Many people are now unable to borrow enough to buy a home." The number of first-time buyers had dropped by almost 25 per cent this year compared with the same time last year, he said.
He said there was unlikely to be a repeat of the late 1980s, when a crash left millions with homes worth less than their mortgages. "The fundamentals underpinning the housing market remain in place," he said. "There appears to be little prospect of a sharp reversal in either employment levels or interest rates."
Nationwide said last week that it expected a gentle slowdown despite reporting a 1.3 per cent surge in prices in May.
Traders in the City of London have retreated from their forecasts of a crash in London prices. IG Index, the spread-betting company, said the latest bets showed they expect a 6.6 per cent fall in prices by March next year compared with 10 per cent a month ago.
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