Halifax 9.375bd Regulatory News (HALP)

6 Mar 2008 08:00

HBOS PLC06 March 2008 Halifax House Price Index National Index February All Houses, All Buyers Index (1983=100)Index (seasonally adjusted) 636.5 Monthly Change -0.3% Annual Change 4.2% Standardised Average Price (seasonally adjusted) £196,649 Key Points • House prices fell by 0.3% in February. Prices in the three months to February were 0.2% higher than in the previous quarter. • House prices in February were 4.2% higher than a year earlier. The average price of a home in the UK has increased by £4,390 over the past year to £196,649. • We predict that house prices will be flat during 2008 as a whole. Sound economic fundamentals are supporting house prices. The number of people in employment - a very important driver of housing demand - has risen by 296,000 over the past year to a record 29.40 million. Lower interest rates are also helping to support the economy and the housing market. We predict that the MPC will cut Bank Rate at least twice more in 2008. • Halifax research shows that residential stamp duty revenue has more than doubled over the past five years from £2.7bn in 2001/02 to £6.4bn in 2006/07. The amount raised at the higher stamp duty rates of 3% and 4% accounted for 79% of all residential stamp duty revenue in 2006/07 compared with 61% in 2001/02. In 2002 the number of properties in the UK valued above the £250,000 threshold was 1.8m; by 2007 this had increased by 201% to 5.5m. • The average home buyer in nearly one in three (29%) of local authorities (LAs) needs to set aside the equivalent of more than 20% of local average annual gross full-time earnings to pay the stamp duty bill associated with buying their new home. The average stamp duty bill was worth more than 20% of average full-time earnings in 91% of London LAs and 61% of LAs in the South East in 2007. Commenting, Martin Ellis, chief economist, said: "House prices fell by 0.3% in February. Prices in the three months to February,however, were marginally (0.2%) higher than in the previous quarter. Over thepast year, the average price of a home in the UK has increased by £4,390 to£196,649. Whilst the housing market has slowed over the past six months, it is supportedby sound economic fundamentals. Interest rate cuts by the Bank of England arealso helping to underpin house prices. Nationally, we predict that house priceswill be flat in 2008." UK economy slows but is still growing at its long-term average pace The latest official figures confirm that the UK's gross domestic product (GDP)increased by 0.6% between 2007 Q3 and 2007 Q4. This is in line with theeconomy's long-term rate of growth, but slightly below the 0.7% increase in 2007Q3. Strength of the labour market should continue to support the housing market At a record 29.4 million, the number of people in employment increased by175,000 between 2007 Q3 and 2007 Q4. Employment was 296,000 higher than a yearearlier. Unemployment fell by 61,000 over the same period (Source: ONS). Bank of England rate cuts should also support the economy and the housing market We expect the Bank of England to follow up the two interest rates cuts sinceDecember with further reductions during the remainder of the year. The MPC is,however, likely to adopt a cautious approach due to concerns over inflationarypressures and an absence of signs that the economy is slowing sharply.Nonetheless, we predict that the MPC will cut the Bank Rate at least twice morein 2008. Lower interest rates should prevent the economy slowing too sharply,helping to support the housing market. Housing market activity has declined significantly in the last 12 months There has been a significant decline in housing market activity over the pastyear. For example, completed property sales in January were down 16% on anannual basis (Source: RICS). The number of mortgage approvals to fund housepurchase in January 2008 was 39% lower than a year earlier (Source: Bank ofEngland). There was, however, a 3% rise in mortgage approvals between December andJanuary, on a seasonally adjusted basis. That may indicate a possiblestabilisation in activity, albeit at a much lower level than in recent years. Stamp duty revenue has more than doubled over the past five years Halifax research shows that total stamp duty revenue from residential propertysales rose by 40% (£1.8bn) in 2006/07 to a record £6.4bn. Over the past fiveyears, annual residential stamp duty revenue has more than doubled with a 140%rise from £2.7bn in 2001/02 to £6.4bn in 2006/07. Estimates of residential stampduty revenue for 2007/08, based on government projections in the latestPre-Budget Report, are for a 14% rise to £7.3bn. Higher stamp duty bands generate nearly 80% of total residential stamp dutyrevenue Residential stamp duty revenue raised at the higher stamp duty bands accountedfor 79% of all residential stamp duty revenue in 2006/07, at £5.1bn. Five yearsago in 2001/02, the higher stamp duty bands contributed 61% of total residentialstamp duty revenue. Number of properties in the higher stamp duty bands of £250,000 and £500,000 hasincreased dramatically in the past five years In 2002 the number of properties in the UK valued above the £250,000 thresholdwas 1.8m; by 2007 this had increased by 201% to 5.5m. Properties above the£500,000 threshold had increased by 337% to 1.0m. Halifax estimates that 26% ofprivately owned properties in the UK are now valued above the £250,000 stampduty threshold compared to 9% in 2002; this includes 5% of properties that arevalued above the £500,000 threshold, compared to 1% five years ago. The average UK home buyer pays 7% of average earnings in stamp duty Across the UK, the average home buyer paid a stamp duty bill of £1,971 in 2007,equivalent to 7% of average annual full-time earnings. Five years ago in 2002,the average stamp duty bill of £1,211 was equivalent to 5% of earnings. Byregion, stamp duty was highest as a percentage of full-time earnings in 2007 inthe South East (23%) and London (21%) and lowest in Scotland (5%). Five yearsago, the average home buyer in all regions paid the equivalent of less than 10%of average annual full-time earnings for residential stamp duty. Home buyers in 29% of local authorities (LAs) have a stamp duty bill equivalentto more than 20% of average annual gross earnings The average home buyer in nearly one in three (29%) of local authorities (LAs) -118 out of 405 - needs to set aside the equivalent of more than 20% of localaverage annual gross full-time earnings to pay the stamp duty bill associatedwith buying their new home. Five years ago, in 2002, the average stamp duty billwas equivalent to more than 20% of average annual full-time earnings in only onein 20 (5%) of LAs - 19 out of 405. Stamp duty bills are highest relative to earnings in London and the South East The average stamp duty bill was worth more than 20% of average full-timeearnings in 91% of London LAs (29 out of 32) and 61% of LAs in the South East(41 out of 67) in 2007. In 2002, only 25% of London LAs (8) and 12% of LAs (8)in the South East had an average stamp duty bill of more than 20% of full-timeearnings. Higher stamp duty thresholds need to be raised significantly If the higher stamp duty thresholds were increased in line with house priceinflation since July 1997 - when the £250,000 and £500,000 stamp duty thresholdswere introduced their respective threshold would now stand at £720,000 and£1,440,000. If the lowest stamp duty threshold had been increased in line withhouse price inflation since March 1993, it would now stand at £191,000. Thiswould be £66,000 above its current level of £125,000. This information is provided by RNS The company news service from the London Stock Exchange