House price growth falters

Fresh evidence that the housing boom is petering out emerged yesterday with Britain's biggest mortgage lender warning that the annual rate of house price growth - currently still 23% - will "fall sharply" over the next few months.

The Halifax's insistence that "we are past the peak" coincided with a prediction from spread betting company IG Index that house prices in London will fall by 10% in less than a year.

Halifax said the south would bear the brunt of the slowdown, which was being driven by a combination of more properties coming on to the market and a decline in the number of first-time buyers.

The annual rate of price growth stayed steady last month at 23% but the Halifax said this was forecast to tumble to 9% by the end of the year. "There will, however, be a marked north/south divide, with the market slowing to a much greater extent in the south."

Reporting a modest 0.4% rise in house prices last month, the bank said its estate agency division had noted that the number of homes coming on to the market was 15% higher than a year ago, with increases in all regions.

"More properties for sale and lower numbers of first-time buyers should cause house price growth to continue to fall over the remainder of this year," said Martin Ellis, the bank's chief economist.

This agrees with the most recent findings from the Royal Institution of Chartered Surveyors, which said some people who had been thinking about selling were putting for sale signs up now in the hope of cashing in before any slump.

At the same time, sales slowed "as many buyers hung on to see if prices fell further".

April's small rise compares with increases of 1.8% and 1.1% in February and March respectively, and means the average house price in Britain is now £127,557.

There is a mixed picture across the country. The bank expects the north to "remain buoyant" for the rest of the year. Also, the fundamental factors that have been driving up prices - including cheap mortgage rates and low unemployment - were still in place, which should ensure a "steady" slowdown, Mr Ellis said.

This week Nationwide said that house prices stood still in April but it broadly agrees with its Yorkshire-based rival about where the market is heading. Nationwide predicts that prices will end this year about 10% up on December 2002.

Others such as Gerrard economist Simon Rubinsohn believe this could be too optimistic. He foresees prices stagnating between now and the end of the year.

IG Index and its spread betting customers were taking an even bleaker view yesterday. "If our clients are right, we will experience the sharpest turnaround in the housing market since the late 1980s," said Giles Wilkes, the company's director of trading. IG said its clients believed the housing market "is in for a rough few months".

It predicts the average London property price in March 2004 will be between £198,000 and £200,000 - down from the March 2003 figure of £220,500. By contrast, it expects the north and north-west of England, Scotland and Wales to all see price growth of 7-8% over the next year.