Halifax reports increase in affordability

House prices fell by 2.2% in October, according to the latest Halifax House Price Index.

House prices in October were 13.7% lower on an annual basis. The UK average price has returned to the level in October 2005 (£168,031).

House price to earnings ratio – a key affordability measure – is improving significantly. The house price to average earnings ratio has fallen by 16% from a peak of 5.84 in July 2007 to 4.92 in August 2008. This is the first time that the ratio has been below 5.0 for four and a half years (4.99 in February 2004). Halifax expects a further improvement in the ratio as prices continue to soften. The long-term average is 4.0.

The UK average house price is 22% higher than five years ago. The average price stood at £138,208 in October 2003; nearly £30,000 lower than today.

Housing market activity shows signs of stabilising. The number of mortgages approved to finance house purchase was broadly unchanged in September for a third successive month, at a seasonally adjusted 33,000 compared to 32,000 in August. Approvals in 2008 Quarter 3, however, were 25% lower than in 2008 Quarter 2.

Martin Ellis, chief economist, said: “House prices declined by 2.2% in October. Housing market conditions remain challenging in the face of the significant pressures on householders’ incomes and the reduction in the availability of mortgage finance since last summer.

“But housing affordability is improving significantly. The house price to average earnings ratio has fallen below 5.0 for the first time for four and a half years. We expect a further improvement in the ratio over the coming months.”

Land Registry reports 8% fall in UK house prices

The Land Registry has revealed annual house prices in England and Wales have fallen 8%, while it posted a monthly fall of 2.2% in September.

This takes the average property to £168,814, according to the Land Registry.

The biggest monthly fall was noted in Wales, where house prices declined by 5.5% last month.

However, London proved the most resilient as prices were down by 6.1% over the year, taking the average property price to £328,927.

Meanwhile, Hartlepool experienced a 4.7% increase over the year, taking the average property to £115,018.

Furthermore, the Land Registry said the number of property sales fell to 58,000 between April and July, compared with 111,000 for the same period in 2007.

The data is regarded as the most reliable house price indicator as it is based on completed property transactions.

According to Howard Archer, chief UK economist at Global Insight, it seems highly likely that house prices have further to fall, particularly as the fundamentals continue to be largely stacked against the housing market.

Reports over the last week are mixed as to how much property prices will fall with economic forecasting agency, Capital Economics, predicting that house prices will fall 35% by next autumn, from their peak of last summer.

Meanwhile, Knight Frank estate agents said house prices in the UK will fall 30% from their high of summer 2007 and fall to levels seen in September 2003.

Yesterday, however, the Centre for Economics and Business Research (CEBR) has predicted that house prices will fall in value by 25% from their peak. The organisation believes that house prices will not recover to the levels they peaked at in 2007 until 2013.