Housing market continues downward trend despite modest increase in house prices

The new House Price Index published yesterday by Halifax shows how the decline of house prices has continued, despite the fact that in March house prices went up by 0.1%.

In the first quarter of 2011 house prices were 0.6% lower than in the previous three months.

These figures don’t come as a big surprise as it is the fourth consecutive quarterly Halifax report in which prices have decreased. Nevertheless, the figures are showing an improvement on the decreases in the 3rd and 4th quarters of 2010 (-1% and -1.1%).

While a slight price increase was recorded in March, with the average house price in the UK being £162,912, the report points out that March prices were 2.9% lower in comparison to the same period a year ago, making it the biggest annual reduction from October 2009.

Commenting on the latest figures, housing economist Martin Ellis said that "house prices continue to fall at a modest pace as measured by the quarterly rate of change”, and Halifax’s forecast “for a 2% decrease in house prices in 2011 as a whole” remains the same as the “economic outlook and individual financial circumstances are likely to constrain housing demand, resulting in some modest downward pressure on prices." 

It is interesting to note, that a similar report produced by the Nationwide a week earlier showed that house prices increased by 0.5% in March, leaving them 0.1% higher than in March 2010. However, Nationwide’s Chief Economist Richard Gardner commented in line with Halifax that “this is unlikely to mark the beginning of a strong upturn in prices” and that “with the economic recovery expected to remain sluggish, the most likely outcome is that the property market will follow suit, with low transaction levels and prices moving sideways or modestly lower through 2011.”

Despite these predictions, even the slightest increase in house prices could be a sign that the housing market is slowly stabilising.