Surprise figures from Halifax yet to be reflected in official house price index from ONS

This article is more than 8 months old

This article is more than 8 months old

UK house prices leapt unexpectedly in December, rising by 1.7% from the previous month to push the annual increase to 4%, according to Halifax data.

Combined with November’s rise of 1.2% month on month, the Halifax index recorded a 2.9% gain across the last two months of 2019, the strongest result since February 2018.

Against the backdrop of a bitterly fought general election campaign and concerns that the outcome may leave the UK’s relationship with the EU uncertain, housebuyers remained confident enough about the property market to bid up prices.

A poll of City economists by Reuters had expected the survey to show a 0.2% decline month on month to reflect the more downbeat trend shown by most surveys over the last year.

But a combination of high levels of employment, strong wage rises, low inflation, low interest rates and, most significantly, at the end of the year a sharp decline in the number of properties for sale, meant that the demand for homes outstripped supply.

Russell Galley, the managing director at Halifax, said the rise compared with an especially weak figure for prices growth in December 2018.

“Looking ahead, we expect uncertainty in the economy to ease somewhat in 2020, which should see transaction volumes increase and further price growth made possible by an improvement in households’ real incomes,” he said.

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The official house price index produced by the Office for National Statistics has yet to reflect a pick-up in prices captured by the Halifax survey. The most recent ONS figure for the year to October showed average prices increased by just 0.7%, the lowest growth since September 2012.

The ONS said the average price of a home was £233,000 compared with the Halifax’s figure of £238,963.

Hansen Lu, a property economist at the consultancy Capital Economics, said: “This latest surge in the Halifax index has certainly come as a surprise. One theory is that stronger price gains signal a Boris bounce.

“The electoral polling was largely one-sided by early December, so some buyers may have decided to push through transactions by accepting higher prices, ahead of what they expected to be tighter housing market conditions after a Conservative win.”

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He said there were good reasons to be sceptical about this view. “The other house price indices show a more modest picture for December. For a start, Nationwide recorded a 0.1% month-on-month rise in prices. Admittedly, Rightmove’s measure of asking prices recorded a 0.9% gain, but prices had fallen across October and November, so annual growth was sluggish, at 0.8%.

“At the very least, even if house price growth did accelerate at the end of 2019, the Halifax index seems to be overstating this gain.”

Like most analysts, Lu said any acceleration in house price growth was unlikely to be sustained. “After all, prices are still very high relative to incomes and interest rates are close to their floor – so the fundamentals leave little room for a sustained surge in house prices. Indeed, we expect house price growth to end 2020 and 2021 at below 2% per year,” he said.

• This article was amended on 9 January 2020 because an earlier version said the monthly house price growth from November to December last year was 1.5%. This has been corrected to 1.7%.