The housing market saw an increase in February, but a fall in the previous month suggests a mixed pattern which could be a sign of a slowing housing market, according to the Halifax.
The latest edition of the Halifax House Price Index shows house prices rose by 1.4% last month, while annual house price inflation at 5.5% remained broadly unchanged from the last two months.
The annual rate is expected to increase over the next few months, as modest price rises compare with slight falls this time last year. The Halifax then predicts the annual rate to fall later in the year as prices rise at a slower pace than in the second half of 2005.
The report predicts house prises to rise by 3% in 2006, broadly in line with the expected rise in retail price inflation, with London housing costs at £8,1333 per year the highest in the country. Costs in the capital are 63% above those in the North East, which is the cheapest region a £4,990.
It also claims the combination of improving economic growth, low interest rates and high employment will continue to underpin a healthy level of housing demand over the next few months.
The Halifax does point out a number of factors should limit demand and prevent a significant, and sustained acceleration in house price inflation throughout the year. As it suggests the continuing high level of house prices in relation to earnings will curb the ability of many potential first-time buyers to enter the market.
Martin Ellis, chief economist, says: “House prices increase by 1.4% in February, more than offsetting January’s fall. This mixed pattern of monthly price rises and falls is a typical feature of a slower housing market.”
He adds: “A number of factors should constrain housing demand, as council tax and utility bill increases of well above inflation will put downward pressure on householders’ finances. And additionally the weakening labour market should temper housing demand.”
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