House prices 'pick-up' in August

Investment property news: BBC ONLINE

House prices rose by 1.6% in August, their biggest monthly gain in almost a year, according to the Halifax.

August's rise followed a 0.4% increase in July, and gave a three-month annual rate of increase of 2.5%, the UK's biggest mortgage lender said.

However, the annual rate was still down sharply from a 21.3% rise during the same time last year, the Halifax said.

It warned that August's monthly rise was probably a temporary effect of last month's cut in UK interest rates.

The Bank of England cut the cost of borrowing for the first time in two years at the beginning of August to 4.5% from 4.75%, amid growing concern about slowing UK growth and consumer spending.

Halifax said the average price of a home was a seasonally-adjusted £165,967 in August.

The bank's closely-watched house price survey has shown small gains in prices over the past three months, suggesting the UK's cooling property market is heading for a soft landing, analysts said.

"It adds to already significant evidence that the much-feared housing crash won't materialise," said Gavin Redknap, an economist at Standard Chartered Bank.

"House price growth won't get back to the sort of rates we've been accustomed to over the past five years, but the market should see a mini-revival in the months ahead."

Halifax's August survey contrasted with that of Britain's other main mortgage lender, Nationwide, which last week reported a seasonally adjusted 0.2% fall in house prices during the same month.

Nationwide said UK prices were experiencing a "continued controlled slowdown".

Halifax said August's pick-up in prices was similar to that seen on two previous occasions since 1997 when the Bank of England cut interest rates.

"On both occasions, there was an up-tick in house prices in the month that the interest rate cut occurred; this proved to be a temporary phenomenon," the Halifax said.

Deutsche Bank analyst George Buckley said little had changed in the general picture of the UK housing market.

"Price growth is on a softening trend and we continue to believe that the outlook for the housing market over the medium term is one of flat to falling prices."

- 07 September 2005



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