Halifax 9.375bd Regulatory News (HALP)

8 Jan 2008 08:00

HBOS PLC08 January 2008 Halifax House Price Index National Index December All Houses, All Buyers Index (1983=100)Index (seasonally adjusted) 637.7 Monthly Change 1.3 Annual Change 5.2 Standardised Average Price (seasonally adjusted) £197,039 Key Points • House prices increased by 1.3% in December following three successive monthly falls. Prices in Quarter 4 were marginally lower than in Quarter 3, down -0.8%. House prices in December were 5.2% higher than a year earlier with the average price of a home in the UK increasing by £11,759 over the year to £197,039. • The annual increase of 5.2% made 2007 only the second year since 2001 when prices have risen by less than the long-term average of 8%. • A mixed pattern of monthly price rises and falls - as seen over the past few months - typically characterises a subdued housing market. For example, there were six monthly falls and six monthly increases between July 2004 and June 2005 as the market slowed in response to a series of interest rate rises during 2004. There was a similar pattern in 2000. • We predict that house prices will be flat in 2008. A slower housing market must be taken in context, however. House prices have risen by 182% over the past ten years from an average price of £70,000 at the end of 1997 to £197,000 today. • Sound economic fundamentals will support house prices in 2008. The economy is in good health; employment levels are high. The UK economy is expected to deliver its 65th successive quarter of GDP growth during 2008, extending the longest running period of unbroken growth on record. No other developed nation can match this performance. • The Bank of England is expected to follow last month's interest rate cut with further reductions over the coming months in order to prevent anything more than a gradual economic slowdown. The MPC is likely to cut the Bank Rate at least twice in 2008. Lower interest rates will help to support the housing market. Commenting, Martin Ellis, chief economist, said: "House prices increased by 1.3 per cent in December, reversing some of thedeclines recorded in the preceding three months. This mixed pattern of monthlyprice rises and falls is a typical characteristic of a subdued market. Overall, the housing market continued to slow in the final quarter of 2007 withprices slightly lower than in the preceding quarter. Higher mortgage repaymentsin response to the series of five interest rate increases between August 2006and July 2007 and falling real earnings have put pressure on households' income,resulting in a slowdown in both house price growth and activity in recentmonths. Sound economic fundamentals and lower interest rates will support house pricesin 2008. The UK economy is expected to deliver its 65th successive quarter ofGDP growth during the year, extending the longest running period of unbrokengrowth on record. The MPC is likely to follow up last month's cut by reducingthe Bank Rate at least twice in 2008. House prices are predicted to be flatduring 2008." Prices in the final quarter of 2007 were marginally lower than in the thirdquarter House prices in Quarter 4 were 0.8% lower than in Quarter 3. House price growthmaintained a steady downward trend during 2007. There was a strong start to theyear with prices rising by 2.9% between 2006 Quarter 4 and 2007 Quarter 1. Thequarterly rate of increase eased during the succeeding quarters of the year. A mixed pattern of monthly price rises typically characterizes a more subduedmarket For example, there were six monthly falls and six monthly increases between July2004 and June 2005 as the market slowed in response to a series of interest raterises during 2004. There were also five monthly falls during 2000 as annualhouse price inflation eased from 15% in February 2000 to 2.5% in February 2001. Average price of a home rose by £11,759 during 2007 House prices increased by 5.2% during 2007. The average price of a home in theUK increased by £11,759 over the year from £185,280 to £197,039. The annualincrease of 5.2% made 2007 only the second year since 2001 when prices haverisen by less than the long-term average of 8%. A robust economy and high employment provide strong underpinnings for thehousing market The latest figures confirm that gross domestic product (GDP) increased by 0.7%between 2007 Q2 and 2007 Q3. This was the eighth consecutive quarterly increaseabove the long-term average rate of 0.6%. (Source: ONS) The UK economy isexpected to deliver its 65th successive quarter of GDP growth during 2008,extending the longest running period of unbroken growth on record. No otherdeveloped nation can match this performance. But economic growth is likely to slow to below its long-term average pace in2008 The UK economy is nonetheless forecast to slow with growth of 2.0%-2.25% in 2008compared with around 3.0% in 2007. The long term average rate is 2.5%.Domestically, both consumer and investment spending growth are likely tomoderate in response to earlier interest rate rises and some tightening incredit availability. In 2008 global economic growth is likely to slow,reflecting a weaker US economy constrained by the sub-prime lending crisis. Employment to stay at a record high in 2008 The number of people in employment increased by 114,000 during the three monthsto October compared with the previous quarter. On an annual basis, employmentwas 226,000 higher at 29.29 million. (Source: ONS) Employment levels - a keydriver of housing demand - will stay at a record high despite the expectedslowdown in economic activity this year. Further rate cuts expected in 2008 We expect the Bank of England to cut rates again over the coming months toinsulate the economy from anything more than a gradual economic slowdown. Wepredict that the MPC will cut the Bank Rate at least twice in 2008. This information is provided by RNS The company news service from the London Stock Exchange