British house prices ended a six-month declining streak in October, but the increase reflects a shortage of properties on sale and renewed falls are likely, mortgage lender Halifax said on Tuesday.
Halifax, part of Lloyds Banking Group (LLOY.L), said house prices in October were 1.1 per cent higher than the month before, the first increase since March on a seasonally adjusted basis, after a 0.3 per cent monthly drop in September.
Compared with a year earlier, house prices in October were 3.2 per cent lower versus a 4.5 per cent annual decline in September, leaving the average house price at 281,974 pounds ($347,279), nearly 10,000 pounds lower than a year earlier.
“Prospective sellers appear to be taking a cautious attitude, leading to a low supply of homes for sale. This is likely to have strengthened prices in the short-term, rather than prices being driven by buyer demand, which remains weak overall,” Kim Kinnaird, director of Halifax Mortgages, said.
The Bank of England kept interest rates at a 15-year high of 5.25 per cent last week and its chief economist, Huw Pill, said the BoE was unlikely to consider cutting them before the second half of next year unless there was a change to the outlook.
British house prices surged during the COVID-19 pandemic due to low interest rates, greater demand and temporary tax breaks. Halifax’s house price index is still 18 per cent higher than it was in February 2020, despite a 4 per cent fall since its peak in June 2022.
Halifax said it expected house prices to fall further this year, with a return to growth in 2025.
“While many people will have seen their income grow through wage rises, higher interest rates and wider affordability pressures continue to be challenges for buyers,” Kinnaird said.
The housing market has been one of the areas that has felt the biggest impact of the BoE’s 14 rate rises since December 2021. New home construction has fallen as well as prices.
However, forecasters at Capital Economics said they were likely to scale back expectations for further price falls after the latest data.
“The high cost of borrowing alone is not sufficient to trigger the leg down in house prices we predicted,” Capital economist Andrew Wishart said.
($1 = 0.8120 pounds)