Its monthly index for May also shows that the annual price fall is now 4.2% and on a quarterly basis prices are down 1.2%. The average property now costs £160,519.
Low earnings growth, higher taxes and relatively high inflation are all putting pressure on household finances which is contributing to the weak property market, according to Halifax housing economist Martin Ellis.
‘Confidence is also weak as a result of uncertainty about the economic and employment outlook. These factors are probably constraining housing demand and applying some downward pressure on prices,’ he explained.
‘Overall, we expect a moderate improvement in the economy during the remainder of 2011, which combined with continuing low interest rates, is likely to support housing demand. This should prevent a further marked fall in prices and help to stabilise property values later in the year,’ he added.
He also pointed out that there has been a modest improvement in the balance between supply and demand. ‘The ratio of house sales to the stock of unsold properties on surveyors' books edged up for the third successive month in April, according to the latest RICS monthly survey. This ratio is a measure of market conditions that has historically proved to be a good predictor of short term house price movements. Evidence of a slight tightening in market conditions suggests that there may be an improvement in the house price trend over the coming months,’ he said.
However, he thinks there are tentative signs of an improvement in activity. ‘The number of mortgages approved to finance house purchase is a leading indicator of completed house sales. Industry wide approvals in the three months from February to April were 2% higher than in the preceding three months on a seasonally adjusted basis, according to the latest Bank of England figures,’ explained Ellis.
‘A slowly improving economy and continuing low interest rates should support housing demand. GDP increased by 0.5% between the final quarter of 2010 and the first quarter of 2011, offsetting a similar sized decline in the previous quarter, according to the Office for National Statistics.
‘Overall, we expect a moderate improvement in economic activity during the remainder of 2011. This, combined with continuing low interest rates, is likely to support housing demand, which should prevent a further marked fall in prices and help to stabilise property values later in the year,’ he added.
