Halifax House Prices (Oct.) - Capital Economics
UK Housing

Halifax House Prices (Oct.)

UK Housing Market Data Response
Written by Andrew Wishart

The smallest monthly increase in house prices since June shows that the surge in house prices was losing steam even before the second lockdown was announced. With the economic outlook deteriorating and policy support set to be withdrawn early next year, there is a growing likelihood that some or all of the rise in house prices in 2020 is reversed in 2021.

2020 surge in prices starts to ease

  • The smallest monthly increase in house prices since June shows that the surge in house prices was losing steam even before the second lockdown was announced. With the economic outlook deteriorating and policy support set to be withdrawn early next year, there is a growing likelihood that some or all of the rise in house prices in 2020 is reversed in 2021.
  • The 0.3% rise in the Halifax house price index in October confirms that house prices have had their strongest run for several years. (See Table 1.) The jump in house prices over the last four months has more than made up for a dip in the spring, pushing annual house price growth up to 7.5% in October, its highest rate since June 2016. (See Chart 1.)
  • However, the drivers of this surge in prices are temporary. Admittedly, the shift in demand for more spacious properties due to working from home will probably endure. Halifax reported that while the average price for a flat was up 2% since March, detached house prices rose by 6%. But pent up demand due to the housing market being closed in the first lockdown will soon be expended. And the stamp duty cut will end in March next year. Indeed, Google searches for property websites have already fallen to their lowest level since May, before the stamp duty cut was introduced.
  • While the second lockdown won’t close the housing market to close like the first one, it will still hit buyer confidence. So house prices are unlikely to rise much further. And the second lockdown and the likelihood that some restrictions stretch into 2021 has caused us to revise down our employment forecast too. We now expect the unemployment rate to reach 9% next year. (See here.) With the furlough scheme, the stamp duty cut, and mortgage holidays all due to expire at the same time, there is a growing likelihood that house prices reverse their 2020 gains by the end of 2021. (See here.)

Chart 1: Halifax House Price Index

Source: Halifax

Table 1: Halifax House Price Index

 

2019

  

2020

         

Seasonally adjusted

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

House prices (£000s)

232.9

234.9

239.0

239.9

240.5

239.3

238.3

237.9

237.8

241.8

245.9

249.7

250.5

%m/m

0.2

0.9

1.8

0.4

0.2

-0.3

-0.6

-0.2

0.0

1.7

1.7

1.5

0.3

%3m/3m

0.4

0.4

1.1

2.2

2.7

1.9

0.7

-0.5

-0.9

-0.2

1.3

3.3

4.0

% y/y

0.9

2.1

4.0

4.1

2.8

3.0

2.7

2.6

2.5

3.8

5.2

7.3

7.5

Source: Halifax


Andrew Wishart, Property Economist, +44 (0)7427 682411, andrew.wishart@capitaleconomics.com