House prices bounce back

British house prices climbed 1.1 per cent in December, after two months of decline, Halifax's monthly House Price Index has revealed.

09:37 07 January 2005

British house prices climbed 1.1 per cent in December, after two months of decline, Halifax's monthly House Price Index has revealed.

However, over the three months running to the end of the year prices were up just 0.1 per cent, their smallest quarterly gain for more than four years.

The small rise over the three months to the end of December was seen by Halifax chief economist Martin Ellis as further evidence of the slowdown in the property market.

The small rise in house prices was driven by gains in northern England, with the Midlands and southern England registering small declines in property values.

But there is no reason for alarm, Halifax added.

"Sound housing market fundamentals will continue to underpin the market in 2005, ensuring that the market remains healthy and that house prices fall only slightly," said Mr Ellis.

"We expect a two per cent decline in prices nationally this year with the market subsequently characterised by modest price increases and a steady improvement in transactions beyond 2005," he added.

Halifax's prediction of a small decline in house prices stands at odds with most commentators, who are predicting a modest gain. Nationwide's prediction of a two per cent rise in 2005 is typical of the majority of other predictions.

Halifax blamed the slowdown in prices on the Bank of England's decision to increase interest rates five times between November 2003 and August 2004. This was combined with problems caused for first-time buyers by the runaway house price inflation of recent years.

Despite the modest gains in the second half of the year, the price of the average house in Britain rose 15.1 per cent to stand at 162,086 over 2004, Halifax said.