If you think something sounds familiar about the Halifax’s prediction this morning that house prices will be ‘flat’ in 2010 you would be right.
That’s exactly what the bank forecast in January 2008. By April it envisaged ‘a modest (low single digit) decline. By June that was ‘a fall of up to 9%’. And by December the actual fall was, er, 16.2%.
The Halifax did not make a forecast for 2009 - hedging its bets with comments about the dislocation in the financial markets and improving affordability - but in retrospect perhaps it should have done. That’s because, according to its house price index published this morning, prices rose by a pretty flat-sounding 1.1% - when most commentators expected a continued fall.
But if the end result was flat the journey certainly did not feel like it. On a month by month basis, between January and the low point of April prices fell by 3.5%. Between April and December they rose by 9.4%. The Halifax annual change figures compare quarters and so tend to smooth out peaks and troughs - comparing December 2008 and December 2009 prices actually rose 5.6%.
That tallies with the 5.9% annual increase recorded last week by the rival Nationwide index. The building society predicted ‘no significant price movements in either direction’ but added that ‘the experience of 2009 demonstrates how unpredictable the market is at the current juncture and that one should always be prepared for the UK housing market to surprise’.
As it pointed out, that leaves more questions than answers about 2010. Will interest rates stay low all year or will the end of quantitative easing and rising government bond yields force an earlier than expected increase? Will demand continue to outstrip supply or will the recovery prompt more sales? Will the promising signs on unemployment continue or will public sector cutbacks prompt a new rise?
While prices still look over-valued in relation to earnings, as most economists polled by the FT earlier this week argued, at the moment it’s hard to see a trigger for a significant fall.
And it’s worth remembering that the Halifax and Nationwide indexes set the tone of the debate and are the most widely quoted they are not only ones. With some adjustments, they only reflect the prices of property that has actually been bought with one of their mortgages.
Rival indexes are, well, flatter. Hometrack says prices fell 1.9% in 2009 and will predicts they will fall by another 1% in 2010. The Land Registry index, which includes the prices of all property that sold, says prices fell 0.3% in the year to November. The latest DCLG index says prices were down 2.2% on October 2008.
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