Annual house prices to February fall nearly 18%

According to the latest Halifax House Price Index house prices in February fell 2.3%, taking the fall to 17.7% on an annual basis.

This further fall in house prices in February comes on the back of the glimmer of hope in Jnauary which saw prices rise by 2%.

The underlying quarterly trend showed a drop of 3.6%. Of slight encouragement is that this is less than the 5-6% rate of decline consistently recorded between June 2008 and January 2009.

The Halifax House Price Index has been running since 1984 and provides the longest unbroken monthly data series of any UK housing index.

A key affordability measure is the house price to earnings ratio. This is at an estimated 4.42 in February 2009, down from its highest of 5.84 in July 2007. The long term average is 4.0 and the ratio is fast heading towards this level.

Martin Ellis, housing economist, commented ‘ Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market.’

As well as a widely anticipated cut in the base rate today, the Bank of England is expected to announce it is trying to boost the money supply through quantitative easing.

By boosting the money supply it is hoped it will ease banks willingness to lend to the private sector for such as mortgages and thus start to help stimulate the housing market.