The lender says it expects a mid single digit percentage decline in UK house prices this year although it admits there will be regional variations. It believes that Scotland is likely to record a modest price rises whilst places such as Wales and the West Midlands are expected to see falls above the national average.
Halifax says more Bank of England interest rate cuts are expected over the coming months as signs of the expected economic slowdown accumulate. It claims this evidence will help to allay the MPC’s concerns regarding inflation over the medium term, providing scope to reduce rates.
The lender points that there is a growing – albeit slowing – economy with high employment levels, low interest rates and a shortage of new homes underpinning housing valuations.
It says the economy grew at an annual rate of 2.5 per cent in 2008 Q1; in line with the long-term average. Employment increased by 152,000 in the three months to February compared with the preceding quarter and stands at a record high 29.5m.
Chief economist Martin Ellis says: ‘House prices fell by 1.3 per cent in April. We expect a mid single digit percentage decline in UK house prices this year. There will be regional variations, however. Some areas of the country are likely to record modest price rises whilst other parts are expected to see falls above the national average.
“Price falls should be viewed in the context of the substantial price rises over recent years. UK prices nearly doubled 190 per cent over the ten years to August 2007. A growing economy, high employment levels, low interest rates and a shortage of
new homes underpin housing valuations.’