Halifax Index Shows That House Prices Have Fallen

The Halifax House Price Index showed a 0.4% fall in house prices in May, which is in contrast to the slight rise reported by the Nationwide building society.

The 0.4% drop in house prices during May follows a 0.1% drop in April according to the Halifax and supports the banks view that the property market will remain flat this year.

The Halifax has registered falls in house prices over three of the five months of the year, suggesting that the momentum driven by record low interest rates in 2009 is faltering.

Even though prices did fall in May, they are still 6.9% higher than during May 2009 and are currently 16% below their 2007 peak. However rises in capital gains tax on second homes could depress the market further, some experts are warning.

“The discrepancy between Halifax and Nationwide’s figures, also released this week, can be put down to their small data sets. Halifax and Nationwide represent mortgages at the lower end of the market which are likely to have been the most affected over the last few years, impacting on their figures and the small volumes of transactions they record are leading to volatility in individual monthly data.”, says Stuart Law, Chief Executive of Assetz, a property investment company.

He takes a more optimistic view of the property market, however: “As lenders continue to increase the number of mortgage products available and improve rates and loan-to-values, the market will continue to creep forwards and I would still expect to see a modest growth of 5% by the end of the year.”