Halifax reports fastest growth in house prices in August |
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Published
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Thu, 08 Sep 2005 09:05
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LONDON: August saw the fastest rate of growth in house prices in the U.K. in over a year. Halifax reported that the house price index rose 1.6 per cent to an average of 165,967 pounds -- the biggest since September 2004.
Analysts are skeptical, however, that the trend would remain. They say the figures, in contrast with 0.2 per cent fall in house prices, which the Nationwide Building Society reported, could be not an actual picture of the market. They feel despite the increase, the data for August do not materially change the picture of a downward trend in the annual rate of house price inflation. The house price inflation is running at just 2.5 per cent, way below the 21.3 per cent annual growth at the same time last year.
The Halifax report led to a fall in the government bonds and interest rate futures as it endorsed the view that the Bank of England need not step in at this moment to bring in any cut in interest rates. HBOS Plc, which brought out the report, attributed the increase in prices to the central bank's intervention in August to cut the interest rates to 4.5 per cent. It maintained that the pick-up in August seems to be consistent with a pattern established when the Bank of England implemented the first interest rate reductions during the two previous periods of rate cuts since 1997. "On both occasions, there was an up-tick in house prices in the month that the interest rate cut occurred; this proved to be a temporary phenomenon."
The report categorically said there is no threat of a property market crash as predicted by some since the housing sector had indeed responded to higher interest rate regime.
Savills, leading property services firm, said it is experiencing higher demand for million-pound homes in recent weeks, particularly in London, where foreign businessmen and city workers were the buyers. The estate agents confirmed that house prices are stabilising. House builder Wilson Bowden too said there is evidence of interest from potential buyers in the last few weeks. However, this is yet to translate into actual sales.
The central bank's Monetary Policy Committee, which is meeting today to review the situation, may consider the weak housing market, the survey results on manufacturing, retail and consumer services, which all point to a slowdown. Some economists feel there is no other alternative for the bank to further cut the borrowing costs.
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