House price growth at 5-year low

The annual rate of house price growth has slumped to its lowest level for five years, according to figures yesterday which contradict data issued last week showing surging prices.

Average British property is now worth 0.9% more than a year ago, the Halifax said. But Britain's largest mortgage lender seemed embarrassed by the finding that compares with an annual rate of price growth of 7.1% in November.

It said the latest annual price inflation figure was more a reflection of sharp rises in prices a year ago than an indicator of the current state of the market, which, it added, is set to enjoy steady growth in the coming months. In that respect the new figure was "a little bit misleading", a spokesman said.

Halifax also said property values rose 0.1% last month, taking the typical price-tag to £85,666 compared with £85,563 in December and £84,867 in January last year.

The last time the rate of annual house price growth was lower than 0.9% was in 1996.

Halifax's figures are in stark contrast to last week's data from Nationwide building society showing that prices surged 2.5% in January - one of the largest monthly rises since the late 1980's property boom - lifting the annual rate of price growth to 11.2%.

This is not the first time the two leading commentators on house prices have clashed over where they see the housing market going.

The Halifax spokesman said the sizeable fall in the annual rate was in line with expectations and was attributable to a 2.3% increase in prices notched up in January 2000. It did not amount to a downturn in the market, and the underlying trend shows that prices have been broadly stable in recent months.

"A number of key leading indicators of housing market activity suggest a strengthening in demand over the short term," the bank said. "The UK economy also remains in good health and there is the prospect of lower interest rates over the coming months. These factors should support housing demand during 2001."

The bank has not amended its prediction for growth, which stands at 4% for this year. Nationwide's forecast is 7%.