UK House Prices up in September says Halifax, Makes the Future Interesting

Well, while I have been proven wrong by the Halifax house price index recording a rise in September, this is made up for by the fact that it makes UK house prices very interesting at the moment and in the near future.

Forecast in a recent article that Halifax would reveal a fall in house prices in September. I said this because the Land Registry recorded a monthly drop in house prices in August, and my belief that this was not a blip but the start of a second dip, I said:

"I will wager now that the Halifax index, when it is released in a few days, will show that house prices have fallen based on mortgage approvals among its customer base, which is predominantly in the north.

"I say this because the Land Registry had shown prices rising in July, as did Nationwide and Halifax, which meant that the rises in the South West fuelled by supply shortages were big enough to swallow up the falls in the north. For the Land Registry now to be showing a fall means that the falls in the north must now be big enough to swallow up the gains in the south west, and so the Halifax index will come out negative."

I was wrong in a big way, but it makes things interesting. People seeing that my assertion was wrong will now be wondering if I am also wrong about the Land Registry fall being a blip. The questions that arise from the current situation going forward are:

~

• Will the Land Registry record price increases in September when it is released in a couple of months
• And: if the Land Registry continues to show falling prices, how long can the two lenders continue to show prices rising,

My belief that the Land Registry recording a fall in house prices in August was not a blip, but the start of the second dip we have long warned about is because the price rises have always been based on massive supply shortages meeting nominal growth in demand.

This always left it vulnerable to supply increases which became more likely with every positive month; a: because people were being brought out of negative equity and/or back in a situation where they could conceivably sell up and buy another house, and/or b: the positive market makes more people try and sell anyway, and c: rising unemployment means continued repossessions.

So, when the Land Registry recorded prices falling in August, it logically seemed to indicate that the fragile floor had been removed from underneath UK house prices and all bets were off. Richard Mckay, director of Private property sales portal Zuungalow.com thinks that now is a good time to sell for a very novel reason, he said:

"Prices have fallen drastically on UK property there is no question about that. Nor is there any question about the fact that it will likely be 2-5 years before houses regain the value they held in the beginning of 2007.

"However, all houses have fallen in value, so you will save on your next home what you lost on the sale of your old one. But now, if you sell to first time buyers, you can take solace in the fact that, yes, you lost money but you did so voluntarily to help a first time buyer get onto the property ladder."