House prices fall in February on the month, Halifax data shows

UK house prices subsided 1.4% month-on-month in February, well below the consensus for a flat month after two months of strong gains, according to data from Halifax.

In the three months to end-February house prices rose 3% compared to the previous three-month period, up from 2.2% in January and 1.4% in November.

The year-on-year gain for the three months to February remained at 9.7% as it was in January.

Economists said the 1.4% month-on-month decline was likely to be a correction after sharp increases of 1.7% in January and 2.0% in December.

Halifax's data differed somewhat from that published by Nationwide earlier on Thursday showing house prices rose 0.3% month-on-month in February.

“Prices continue to rise at a robust pace driven by a significant imbalance between supply and demand," said Halifax housing economist Martin Ellis. "Whilst this position is likely to continue over the coming months, there are some tentative signs that the supply situation may be beginning to improve."

He pointed to an increase in instructions for secondhand properties coming up for sale in the past two months and increased level of housebuilding in 2015.

"Further ahead, increasing affordability issues, as house price increases continue to exceed wage growth, are likely to curb housing demand and cause price growth to ease.”

The latest data from the Bank of England showed strong housing demand, with mortgage approvals for house purchases rose 21.6% year on year to a two-year high in January, with reports that lending is being influenced by buy-to-let investors and second home buyers looking to make a purchase before April’s rise in stamp duty.

February’s sharp fall in the Halifax measure of house prices was "not a convincing signal the market is cooling", said economist Sam Tombs at Pantheon Macroeconomics, with the Halifax measure is seasonally adjusted but often very volatile.

"High levels of consumer confidence and record-low mortgage rates will ensure approvals continue to rise over the coming months. The looming introduction of a 3% stamp duty surcharge on buy-to-let and second home purchases in April will stimulate demand too, albeit temporarily. With the supply of homes coming on the market still extremely low, stronger demand will ensure house prices have considerable momentum this year."

Fellow economist Howard Archer at IHS Global Insight said that beyond the stamp duty rise, a "potential major downside risk" to housing market activity and prices came from uncertainty around the vote on EU membership on 23 June.

"A vote for Brexit would be liable to see a marked hit to UK economic activity over the rest of this year and in 2017 amid heightened uncertainties, which would likely weigh down heavily on the housing market."

He expects house prices to rise by around 6% over 2016 amid reasonably healthy buyer interest.

Such a rise could well be fuelled by increased expectations that interest rates will not rise this year, which has been reinforced by very weak PMI data also released on Thursday.