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House prices rose by 1.9% in January, Halifax said today, putting an end to months of falls and taking many commentators by surprise.
The last time prices increased was in January last year when they rose by just 0.1%. Since then prices have been on a downward slope, falling by more than 1.5% in every month except September, according to figures from the UK's largest lender.
January's price increase reverses a fall of 1.6% in December – a revised figure, with Halifax previously reporting a 2.2% drop – and the average price of a home in the UK now stands at £163,966, more than £4,000 higher than at the end of December.
However, the annual rate of change, measured by comparing the average for the latest three months against the same period a year earlier, shows year-on-year falls increased to 17.2% in January from 16.2% in December.
Halifax said it was important not to place too much emphasis on any one month's figures, and that the three-month figures, which are a better indictor of underlying trends in the market, showed prices had fallen by 5.2%.
Halifax's housing economist, Martin Ellis, said: "Historically, house prices have not moved in the same direction month after month even during a pronounced downturn.
"For example, prices fell for seven successive months in 1989 but subsequently increased in three of the first 10 months in 1990 even though the overall trend in prices was downwards."
Ellis said there were some very early signs that market activity may be stabilising, although at quite a low level, adding that the housing market was likely to have a "difficult year".
Last week, rival lender Nationwide building society reported a 1.3% drop in prices in January, and analysts had been expecting similar figures from Halifax.
Further declines expected
Howard Archer, chief UK economist at IHS Global Insight, said the figures were incredible.
"The very unexpected spike up in house prices in January reported by the Halifax does not fundamentally change our belief that further significant falls are highly likely in 2009.
"House prices can be very volatile on a month-to-month basis, and it is significant that January's rise on the Halifax measure followed particularly sharp falls through the fourth quarter of 2008," he said.
Archer added that he was standing by his prediction that prices would end up 35% below their August 2007 peak before the market bottomed out. "We would certainly want to see more widespread and sustained signs of revival before changing our view of the housing market," he added.
Estate agents have reported an upturn in interest from new buyers, spurred on by falling interest rates and more affordable homes. Property website Globrix said traffic had almost doubled last month and searches were up 71%, with most growth at the bottom end of the price scale. Meanwhile David Smith, a senior partner at Dreweatt Neate, an estate agency firm in the south-east, said there had been an increase in new buyer activity. "Interest in the market is already much stronger than in 2008 and enquiries more serious," he said.
However, few of these enquiries have so far been converted into sales. Mortgage lending remains tight and rising unemployment is deterring many would-be buyers who could raise loans from committing to a purchase. Figures from the Bank of England showed a 15% increase in the number of approvals for house purchases in December, but this was from a record low of 27,000 in November.
Even if the Bank cuts interest rates again today mortgage lending is likely to remain constrained, with lenders continuing to target their best deals at borrowers with the largest deposits.
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