Halifax House Price Index - October 2003
Key Points
House prices increased by 1.5% in September, underlining the strength of the market.
2003 is definitely the 'Year of the North'. On an annual basis, house price gains in the North (38%), Yorkshire and the Humber (32%), and Wales (32%) have significantly outstripped those recorded in the south of England. In the south, house price gains over the last year have been: Greater London (9%), the South West (12%), the South East (12%) and East Anglia (16%).
Prices in Greater London increased by 2.1% in the third quarter, more than reversing the 0.7% fall in the second quarter. Despite this rise, annual house price inflation in Greater London continues to slow, falling to 8.6% from 11.5% in the second quarter. The capital remains at the bottom of the regional annual house price growth table with annual house price inflation below 10% for the first time since Quarter 1, 2001.
North of the border in Scotland, strong price rises over the last six months have caused the annual rate of house price inflation to more than double in the last year, from 7% in 2002 Quarter 3 to 20%.
The annual rate of house price inflation is likely to fall from its current rate of 18.6% over the next two months, as prices will probably rise more slowly than last autumn when record monthly increases were registered.
Commenting on the figures Martin Ellis, Chief Economist, said:
"House prices increased by 1.5% in September, slightly ahead of the rises recorded in both July and August."
The latest Bank of England figures on the number of mortgage loans approved for house purchase, a reliable housing market indicator, demonstrate that there has been a pick-up in activity in recent months. The number of approvals averaged a seasonally adjusted 114,000 per month in the three months to August, 19% higher than in the preceding three months. The House Builders' Federation has also reported a sharp rise in interest in new homes in the last few months. These findings underline the ongoing strength of the housing market.
In contrast to the second quarter of the year when there were modest falls in London and the South East, house prices increased in all the regions of mainland Britain during the third quarter. Price rises in southern England, however, were modest by comparison to northern Britain with the biggest price gains achieved in Yorkshire and the Humber, Scotland and the North West.
The latest figures confirm that 2003 is the 'year of the north' with a clear north/south divide in house price performance over the past year. Prices have increased most in the North region where prices have gone up by over one-third since this time last year. North of the border, strong price rises over the last six months have caused the annual rate of house price inflation in Scotland to more than double in the last year to 20%. London has seen the smallest rise with an annual increase of 9%.
There has been a narrowing in the gap between prices in the north and south during the past 12 months, although there remains a substantial differential. The average price in London is now £129,100 higher than in the North region, over £8,000 lower than the gap of £137,300 in the third quarter of 2002.
A combination of low interest rates and high employment levels continues to support housing demand. The relatively low level of prices in relation to average earnings across northern Britain has, however, given prices an extra boost in this part of the country. Labour market trends have also been favourable in the north over the past year, reinforcing the impact of more affordable housing.
The rapid rise in prices in the north means that prices are not as low in relation to earnings as a year ago. This is expected to act as an increasing brake on the housing market in regions outside the south and Midlands over the next 12 months, causing a slowdown in house price inflation in these areas and a more even pattern in house price growth across the country in 2004.