Property price rises hit five-year low

Property prices in the UK are now rising at their slowest pace for five years, according to figures from the mortgage bank Halifax.

The survey shows prices fell by 1.1% in December, leaving property prices 3.1% above their December 1999 level.

This represents a lower rate of annual increase than the 7.1% seen in the previous month - and less than the 4% rate predicted by Halifax for 2001.

It is also sharply down on the 16% annual rate of property price rises seen in January last year.

But the Halifax figures show a far weaker housing market than the Nationwide's survey last week, that said prices were more than 9% higher than a year ago.

Statistical quirk

The Halifax says the small annual rise is partly a statistical quirk, because there was a sharp rise in December 1999.

House price inflation slowed significantly during 2000, from a peak of 16.1% in January.

Halifax said the dampening effect was caused by a number of factors, including four interest rate rises between September 1999 and February 2000, and the abolition of mortgage interest relief in April.

In addition, the rise in house prices in the south of England during 1999 had made it more difficult for buyers to enter the market, while there was also a slowing in the growth of household disposable income during the year.

But it maintains that the rate of property price inflation will not fall lower this year.

"Housing demand will be underpinned by a favourable economic and affordability background and the prospects of lower interest rates during 2001," Halifax said in its monthly report.