Good news, or maybe not, as Halifax price index ‘goes rogue’

Just when you thought it was all Brexit doom and gloom, a major index shows that house prices in February grew on an annual, quarterly and monthly basis for the first time since October. 

One index result does not make a market boom, but the latest Halifax house price index has taken the industry by surprise - and has made a few analysts query its results.

It shows that house prices rose 2.8 per cent on an annual basis in the three months to February, growing at a faster rate than the 0.8 per cent increase reported for January. 

Meanwhile prices rose a dramatic 5.9 per cent on a month-on-month basis and in the December-to-February quarter grew 1.8 per cent over the previous three months.

"House prices have grown on an annual, quarterly and monthly basis for the first time since October 2018," noted Halifax Managing Director Russell Galley, adding that a shortage of homes for sale will "certainly be playing a role" in supporting prices.

"People are still facing challenges in raising a deposit which means we continue to expect subdued price growth for the time being. However, the number of sales in January was right on the five year average and, at over 100,000 for the fifth consecutive month, the overall resilience of the market is still evident" he says.

However, Howard Archer, chief economist to the influential EY Item Club of economists, says Halifax’s jump is “completely off the radar” and varies hugely from rival indicates. 

“The Halifax house price measure has been particularly volatile in recent months and the sharp monthly movements have been out of kilter with other measures” explains Archer.

Former Savills analyst Neil Hudson tweeted: “Something not right about the Halifax index: best to ignore or smooth out.”

Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, agreed, calling Halifax’s jump “implausible” and adding: “We have little confidence in Halifax’s index as a reliable indicator of the housing market. Its extreme volatility … undermines its validity.”

However, after a lacklustre start to 2019 according to earlier measures, agents have broadly welcomed the Halifax findings.

“There is still a shortage of supply throughout the UK property market which certainly underpins house price growth, but these latest figures showing an increase annually, quarterly and monthly proves that the housing market remains remarkably resilient. Once we have an outcome for Brexit consumer sentiment will slowly improve and demand, which is very much evident in today’s market, will start to be met with an increase in supply levels” predicts Iain McKenzie, chief executive at The Guild of Property Professionals.

And Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The increases across the board are certainly welcome and particularly the reference to transaction numbers keeping up with the five-year average but there is no doubt that the shortage of supply is a significant factor in the uplift. The reasons behind it are certainly not just to do with Brexit as we consistently hear on the doorsteps - affordability and tough lending criteria as other factors. Local factors are also highly relevant and activity varies quite a bit from area to area.”

From London agency Chestertons, managing director Guy Gittens adds: “The number of new properties coming onto the market at the start of the year in the capital was down 22% compared to 2018. This shortage of available properties for sale, combined with rising buyer demand - Chestertons year to date increase is a staggering 38 per cent - slowed the rate that house prices have been falling in London. Following two years of substantial price drops, the market is now bottoming out.”