According to the latest figures from the Halifax, the UK’s biggest mortgage lender, house prices were up 1.3% in December. It’s the first rise for four months, and has come as a pleasant surprise to the City, which was expecting another fall.
It also puts a better spin on the figures for the last quarter of the year, cancelling out the 1.3% fall in November and ensuring a drop of just 0.8% during the period. This meant that for the year as a whole, the average UK house value rose to £197,039, up 5.2%. It’s only the second time since 2000 that prices have grown less than 8%, but it’s worth bearing in mind that this average has almost trebled since Labour came to power in 1997. This couldn’t - and indeed shouldn't - go on forever.
The figures might also relieve the mounting pressure on the Bank of England to cut interest rates on Thursday. After yesterday’s news that M&S and Sainsbury’s have been sucked into the retail gloom, the British Retail Consortium reported today that Christmas sales on the high street were up a paltry 0.3%, about three times lower than expected. It reckons that a half-point rate cut is the only way to avert the end of the world as we know it.
Halifax is admittedly cautious about the prospects for the housing market in 2008, predicting that prices will remain flat across the year. But it doesn’t seem to share the view that the economy is doomed. It expects the UK to enjoy growth of between 2 and 2.5% this year, which is lower than last year’s figure of 3% but hardly disastrous. Meanwhile employment will stay at record levels, and interest rates will fall. ‘The economy is in good health,’ the lender insisted today.
In other words: a gentle slowdown, but not an economic Armageddon. So let’s enjoy this rare moment of optimism before the next set of housing market figures come out and show the exact opposite…