Ordinarily we’d steer clear of house price stories at the moment – life is miserable enough without us depressing you with an endless stream of ‘house prices tanking’ stories. But we decided to make an exception for today’s figures from the Halifax – because if you look very carefully, they do suggest a chink of light at the end of the tunnel. Admittedly, house prices are down again – but September’s fall of 1.3% is the smallest for seven months. With Nationwide singing a similar tune last week, could this mean we’re finally getting somewhere near the bottom of the market?
OK, so it’s no more than a chink of light. And glass-half-empty types (who are firmly banned from MT Towers) will inevitably highlight the other notable stat from today’s release: house prices have now fallen by a record 13.3% since September last year, the biggest annual fall since records began. The average UK house is now worth £172,108 – that’s £26,000 less than this time last year, and brings prices back down to January 2006 levels. And according to the Halifax, we’re not finished yet: ‘The ongoing pressures on householders' income, combined with the reduction in the availability of mortgage finance mean that market conditions will remain challenging,’ says chief economist Martin Ellis.
But we’re determined to be optimistic nevertheless. For instance, this fall at least means that houses are getting more affordable. The house price-to-earnings ratio has fallen from a peak of 5.84 to 5.02 – that’s still above the long-term average (and remains fundamentally unsustainable, economists would argue), but it’s the best ratio since 2004. And at least if prices keep nudging downwards, this is only going to get better.
All we need now is for potential buyers to be able to get a mortgage – after all, greater affordability isn’t much use if nobody can borrow the money they need to buy. And on that front, the Halifax welcomed yesterday’s move by the government to chop 50bps off interest rates, which several banks have already passed on to customers. ‘Lower interest rates will help mortgage borrowers faced with increasing pressures on their finances and provide a valuable support to the housing market,’ insisted Ellis.
Of course interest rate cuts alone are unlikely to stop the market’s fall in the short term. But the hope is that yesterday’s £500bn stimulus plan might get the banks lending again, which should help in the longer term. Homeowners threatened with negative equity will hope that today’s figures are the first hint of stabilisation...
In today's bulletin:
Glimmer of hope for house prices
WH Smith fuels high street optimism
Iceland's frosty relations as Kaupthing falls
Editor's blog: Feeling Robbie's £1bn pain
MT's Little Ray of Sunshine: Google saves our email blushes