Latest figures from the Halifax show house prices in the UK fell by 3.6 pc in September. The average UK house is now valued at £162,096 according to the bank.
Latest figures from the Halifax show house prices in the UK fell by 3.6 per cent in September. The average UK house is now valued at £162,096 according to the bank.
Monthly house price figures can be very volatile – particularly at times like the present when the volume of transactions is below historical norms but taking a slightly longer perspective it seems the recovery in house prices that took place in 2009 has petered out. The trend in house prices is sideways to downwards. Prices in the third quarter were 0.9 per cent lower than in the second quarter and the recent peak in prices was in January this year.
Earlier in the year, the Halifax said that house prices had stopped increasing because there had been a rise in the number of people putting properties on the market. But the latest figure suggests additional factors are now in play.
In particular, there has been a marked drop in consumer confidence since the ‘emergency budget’ on 22 June caused by increased worries about the outlook for employment, the prospect of public spending cuts and the planned increase in the standard rate of VAT. It is likely people have become more reluctant to move home, or will only do so if they can negotiate a lower price.
Is this a good thing or a bad thing?
In the short-run, a large and sustained fall in house prices would undoubtedly increase the risk of a period of disappointing economic growth and perhaps even a ‘double-dip’ recession because falling house prices, sluggish consumer confidence and weaker consumer spending would all feed off each other.
From a longer-run perspective, though, increasing house prices should not be welcomed. Economists are almost unanimous in agreeing that growth in the UK economy needs to be tilted away from debt-fuelled consumer spending (supported by higher house prices) towards exports and business investment. Furthermore, house prices are still at very high levels relative to average earnings in the UK. This makes it very difficult for young adults to take a first step on the housing ladder.
So, the fact that house prices fell so sharply in September might be a cause for concern – but an extended period of flat – or slowly falling – prices would be beneficial for the UK economy.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.