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11th January 2012

House prices end the year down 1.3%

Average house prices fell by 1.3% last year, according to the latest monthly survey from the Halifax, to finish at £160,063. The figure is very close to the latest information from the Land Registry but is in sharp contrast to London's fortunes. This morning, Knight Frank reported that London house prices rose 12.1% last year and are now 7% higher than their previous record in March 2008. Astonishingly, London house prices have risen over 40% since their low in March 2009. Outside London, however, the picture is very different. Halifax said that in 2011, on a monthly basis, house prices fell six times, rose five times and stayed unchanged just once. However, they ended with a fall of 0.9% in December compared with November, and by 1.3% in the final three months of the year.

Martin Ellis, the Halifax housing economist, said: “Whilst there was a modest fall overall in prices during 2011, house prices held up well last year in the face of the difficult and deteriorating economic climate and substantial pressure on household finances.

“If the UK can avoid recession, we expect broad stability in house prices in 2012.

“There is, however, considerable uncertainty regarding the prospects for the UK economy which will, to a large extent, depend on how events in the euro zone unfold. In addition, the extent to which households choose to reduce their debts will also affect growth. As a result, the outlook for house prices is also uncertain.”

A report from the Bank of England last week warned that mortgage lending will become tighter this year.

Its report said that lenders expect “the proportion of total loan applications being approved to fall over the coming quarter with some lenders commenting that they had revised down expectations for households' disposable incomes and hence the affordability of taking out new secured loans”