House prices fall
House price growth is set to slow over the coming months
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Thursday, 08, Nov 2007 11:14
UK house prices fell by 0.5 per cent in October, according to research which provides further evidence of an apparent slowdown in the property market.
The annual rate of house price inflation also dropped back last month, the Halifax reports.
Its latest house price index reveals that property prices rose by 8.9 per cent in the year to October, down from the 10.7 per cent growth reported in September.
The average price of a home in the UK now stands at £197,248, according to the research.
Halifax warned that annual property price inflation was set to drop further in the coming months, stressing that recent figures showing a fall in mortgage approvals and decline in new buyer interest pointed to a slowdown in market activity.
"The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity," explained Halifax chief economist Martin Ellis.
But he added that sound market fundamentals, including high levels of employment and a shortage in the number of properties available, would continue to support house prices in the long-term.
Responding to the figures, which follow a series of surveys which have pointed to a slowdown in activity, Global Insight chief economist Howard Archer warned that a sharp correction of the market was now a "genuine possibility".
"Most data and survey evidence are pointing to weakening housing market activity and cooling prices in the face of slowing activity, increased affordability pressures and tightening lending practices, and the Halifax data are certainly consistent with this," he said.
Mr Archer added that the latest house price data supported the case for the Bank of England to cut interest rates.
However the Halifax survey contradicts the most recent data from rival lender Nationwide, which claimed that house prices rose by 1.1 per cent in October. Nonetheless it too warned that property prices were not immune to deteriorating affordability and tightening credit conditions.