House prices rise 1.2% in October as property market ‘weathers the storm’ for now

House prices leapt 1.2 per cent last month to continue a highly mixed pattern of price movements this year, the Halifax has reported. In its October housing market report, the lender found that the average UK property is now worth £163,311, marginally higher than at the end of 2010.

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The average price in October was £508, or 0.3 per cent, higher than in December 2010 on a seasonally adjusted basis.

However, despite the increases over the last month, house prices are down 0.3 per cent on the more stable rolling three-month . Values fell 0.3 per cent in September and 1.1 per cent in August.

The October rise defied analysts’ predictions – a poll by Reuters had expected a monthly increase of just 0.1 per cent and an annual decline of 2.3 per cent.

The market has followed a mixed pattern so far this year according to the Halifax, with five monthly rises, four falls and one month of no change at all.

Halifax housing economist Martin Ellis said that the prospect of lower Bank of England interest rates, which still remain at a historic low level, will continue to support the market.

He said: ‘The housing market has proved highly resilient in recent months despite the weak economic recovery and the deterioration in the outlook for both the UK and global economies.

‘Both prices and activity levels are expected to remain close to current levels over the coming few months.’

The report also found that house prices are down on an annual basis. The average house price in October 2010 was 1.8 per cent higher than now at £164,320.

In other surveys, analysts have painted a bleak picture of the UK house market in coming year. Many economists see house prices in Britain falling in the months ahead as the country teeters on the brink of recession.       

Howard Archer, chief UK economist at IHS Global Insight believes house prices will spiral downwards. He said that while October’s performance was a surprise, he expects prices to fall by 5 per cent from current levels by mid-2012.

He said: ‘We hugely doubt that October’s spike up in house prices heralds the start of a sustainable pick up in house prices. We suspect it will prove to be a temporary spike.  

‘House prices can be notoriously volatile on a month to month basis and there are often significant fluctuations around a trend. So October’s jump in prices does little to change our view that house prices are headed down over the coming months and are likely to fall by 5 per cent from current levels by mid-2012.’

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