May 6, 2008 | posted by Michael Baxter in House prices |

House prices have stopped falling – more or less, at least that is the implication of the latest housing market report from the Halifax.

In its most recent survey, published on Friday, it had house prices down 1.3 per cent in April, taking the annual rate to -0.9 per cent.    “We expect a mid single digit percentage decline in UK house prices this year,” it said.

But then, after acknowledging some difficulties with the economy, said, “High employment and low interest rates support house prices.” And its chief economist Martin Ellis said, “Price falls should be viewed in the context of the substantial price rises over recent years.  UK prices nearly trebled 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.”

But this is what is odd.  Halifax predicts a mid single digit percentage decline in house prices, yet a quick look at their figures reveals that house prices in April were already around 5 per cent down on August last year.  Back then, it had average prices at £199,600, now it is recording average prices of £189,027. 

In other words, for the Halifax prediction of mid single digit prices to be right, house prices must stop falling now.  The implication is they have reached bottom already.

Yet with mortgage approvals figures going from bad to worse, with surveys from the likes of the Royal Institution of Chartered Surveyors suggesting inventories levels are rising, it does seem a little hard to believe we have seen the worst of it.

If you believe, of course, that house prices have been driven up by speculative motives, with buy-to-let investors buying in the belief prices will go up, and first-time buyers spending more money than they could really afford in the belief prices would go up, then actually, it seems likely prices have a lot further to fall.

But while the likes of the Halifax and Nationwide continue to try and put a positive gloss on things, their lending arms are doing the opposite.

This morning, Graham Beale, the chief executive of Nationwide was quoted in the FT as saying, “I can’t see 100 per cent loan-to-value loans returning in the market in the medium-term let alone the short term.”

Last week, the Halifax announced it was to stop offering home loans on its standard variable interest rate to new customers from 3 May.

Mortgage lenders are not passing on the Bank of England rate cuts to lenders.    Regardless of the reasons for this, the fact is house prices are falling partially as a result of this policy.

For many years the dynamic duo of the Halifax and Nationwide have been making nice soft noises about the strength of house prices.    This in turn must surely have influenced Channel Four and the BBC with their glut of programmes promoting the housing market and property investment.   Not to mention, filled estate agents with even more hope than comes naturally to them. 

It seems likely that the Halifax and Nationwide are at least partly responsible for house prices rising too high.

But with power comes responsibility and, frankly, they need to do more.  It is time they put their money where their mouths have been and support their predictions with more-generous lending terms. 

It won’t happen, of course.     Mortgage lenders talk up house prices, but take no responsibility when they fall.

It used to be like that for investment in shares, but then the regulator put an end to that, with all those caveats about how shares can go down as well as up.  

For the last ten years, with regards to housing, the regulator has been asleep at the wheel, and the banks have been far too easy with the gas – both in terms of gas in the form of money and gas in the form of hot air, pumped directly into a bubble made of hype.