Halifax says house prices down 1.9%

UK house prices fell further in March, according to the latest Halifax House Price Index, although over the full first quarter of 2009 prices fell at a slower pace than they had last year.

The Index in March showed a drop of 1.9 per cent and is in contrast with the picture painted by the latest Nationwide House Price Index on Thursday which showed prices rising last month. The two lenders’ indices, closely watched by economists because of their long history, have largely mirrored each other in recording house price moves in recent years. However, they have occasionally diverged, as they did in January when the Halifax Index showed prices rising while Nationwide showed them falling.

Analysts have noted that because sales volumes have been at historic lows, even small changes may have a disproportionate effect on indices.

Martin Ellis, chief economist at Halifax, noted that for the quarter the drop in house prices was 2.7 per cent from the previous quarter and is a smaller rate of decline than the 5.0 to 6.0 per cent averages seen through much of 2008.

“There are some very tentative signs that activity may be beginning to stabilise,” Mr Ellis said, noting that the number of mortgage approvals in March was the highest since May 2008. He also pointed out that housing is more affordable now than it has been in years. The ratio of the average house price to average earnings is now 4.34 per cent and is the lowest it has been since early 2003.

Also, as a percentage of income, the amount homeowners are devoting to mortgage costs is falling. On average, homeowners now pay 22.6 per cent of income on housing cost, down from 26.9 per cent.

However, he warned that despite improvements in affordability, rising unemployment and flagging consumer confidence are likely to weigh on house prices