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Volatile Halifax house price index sparks doubts over reliability

House prices jumped 2.8% in the three months to February compared with the same period a year ago, according to the latest figures from Halifax, while on a monthly basis prices rose 5.9% in February, the largest single monthly increase ever recorded on the index. The strong rise was in stark contrast to figures from rival lender Nationwide last week, which showed prices were just 0.4% higher in February than the same month last year.

Halifax’s house price index is based on homes bought with mortgages, excluding council house sales, shared ownership and help-to-buy schemes, while Nationwide’s is based on owner-occupier house purchase transactions involving a mortgage. Buy-to-let and cash deals are not counted. Halifax’s index has tended to be more volatile than other measures of house prices of late.

Russell Galley, managing director at Halifax, said: “House prices have grown on an annual, quarterly and monthly basis for the first time since October 2018, taking the average house price to £236,800. The shortage of houses for sale will certainly be playing a role in supporting prices.”

While annual house price growth at 2.8% was within its expectations, he said it was fairly subdued compared to 2015 and 2016, when the figure stood at 8.3%. Galley added: “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.”

Halifax has been among the most bullish about the UK property market post-Brexit, with expectations of 2-4% growth nationally by the end of this year under an orderly Brexit. 

However, the Royal Institution of Chartered Surveyors (RICS) has predicted that the national house price growth will come to a “standstill” this year, but a supply shortage “will negate outright falls”.

Yomdel CEO, Andy Soloman, said of the Halifax figures: “Much like the wider political spectrum, a drastic monthly increase of almost 6% will no doubt confuse many who have otherwise been told we’re in the midst of a complete market slowdown. Monthly price growth measurements can be somewhat unreliable however, on both an annual and quarterly basis the market looks to be finding good form early in the year. 

“On the face of it, we remain in a fairly strong position with the property market holding firm due to a growing level of buyer sentiment and the consistent affordability of borrowing money. Both are helping to bolster a market that has otherwise been running on the fumes of political uncertainty for quite some time.”

Director at Benham and Reeves, Marc von Grundherr, added: “While such notable monthly price growth is likely to be an anomaly, the nature of the UK market and the ever-shifting balance of supply and demand can see some drastic swings in market momentum.

“We’ve seen a consistent level of demand and transactions over the last few months and this is starting to filter through in terms of price growth, with the long-term performance of the market starting to look very stable. Homeowners in parts of London, in particular, may be yet to feel this steady hand and those at the top end of the market will have to wait a while longer before the market springs back into life completely.

“That said, we’ve seen a consistent interest from foreign investors so far this year and like the wider market, this positive sentiment should soon start to convert to something more tangible than interest alone. We’ve also seen a 16% increase in enquiries for one-bed properties which would suggest the appeal of city living is starting to grow once again where as previously, it had been forsaken for larger, more family orientated properties on the peripherals of the capital.”

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. It is very hard to take (the) data seriously at the moment. Prices up 5.9% month on month in February - I don't think so. Review your seasonal adjustment methodology!”

Lucy Pendleton, a founder director of the estate agent James Pendleton, said: “This market is rattling around like a ricocheting bullet. It’s an incredibly unusual shift, even for monthly prices, which are known to be more volatile.”

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

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

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