Press Release Summary: The last week has brought back a little ambiguity to the property market among those looking for hard evidence of trends. First there were the figures from property portal Hometrack
Press Release Body: The last week has brought back a little ambiguity to the property market among those looking for hard evidence of trends. First there were the figures from property portal Hometrack, which found that this month\'s house prices were down by 0.2 per cent, the fifth successive monthly reduction. Against that, however, was the evidence in the same survey of rising demand, with the first increase in the number of new buyer registrations since last summer.
Further figures from the Land Registry may have clouded matters further. The underlying annual inflation rate figure for England and Wales fell to 6.4 per cent in the year to January 2008 from 6.7 per cent in December. But the monthly figures showed a 0.9 per cent increase, indicating the annual rate was more of a reflection of a higher rate of inflation in January 2007.
The January figures may appear healthy enough, with only Wales (down 0.3 per cent) seeing a fall in price. However, the regional figures did not tally with the longer-term picture. The highest increase was two per cent in the north-west, which had seen a below-average 5.8 per cent annual rise, while London and the east midlands - which were at opposite ends of England\'s annual price inflation scale at 13.1 per cent and 3.4 per cent respectively - tied on 1.5 per cent.
It may therefore be argued that the January figures did not necessarily represent a recovery, since they were dependent on the unusually impressive performance of generally underperforming regions (the fourth best performer in January was the west midlands, which had England second-lowest annual increase). This being so, it may be wise to withhold judgement on the potential impact of the December base rate cut.
This month, of course, has seen a second cut, but those hoping to see the property market boosted further by another reduction in March appear to be destined for disappointment. An Adfero poll of eight economists and financial institutions unanimously predicted no change.
Such an outcome could hardly be surprising given that in over a decade of existence the monetary policy committee (MPC) has never yet changed the base rate in successive months - the last two cuts sandwiched an eight-to-one vote to hold in January - but the issues at hand go further than traditional practice. Three of the eight - Lloyds TSB economist Jeavan Lolay, Global Insight chief economist Howard Archer and Ross Walker of the Royal Bank of Scotland - cited fear over inflation as the main factor that would hold the MPC back. Furthermore, Simon Hayes at Barclays Capital and Halifax chief group economist Martin Ellis both forecast that the next cut will have to wait until May.
In fact, the predictions of Mr Hayes and Mr Ellis, which both included a further rate cut later in the year, bore a close similarity to a recent Reuters poll of economists, which revealed a consensus view that there would be a cut by June, another by September, then no change until next year.
Another of the economists who told Adfero there would be no change, Paul Dale of Capital economics, went on record this week predicting that the current round of rate cutting will eventually go as far as to produce a base rate of four per cent. Suggesting that the pace of change will dictate the scale of change, he said: \"We see rates going down to around four per cent, but we don\'t think they\'ll get there any time soon - which will play a part in how low rates have to go.\"
Therefore, while those looking to invest in property who may hope for a rate cut could be disappointed in March, most experts agree that there will undoubtedly be more in the months to come.
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