Halifax 9.375bd Regulatory News (HALP)

7 Jun 2007 08:00

HBOS PLC07 June 2007 Halifax House Price Index National Index May 2007 All Houses, All Buyers Index (1983=100) Index (seasonally adjusted) 637.2 Monthly Change 0.3% Annual Change 10.6% Standardised Average Price (seasonally adjusted) £196,893 Key Points • House prices increased by 0.3% in May, the smallest monthly gain this year and the third consecutive slowing in the monthly growth rate. • The annual rate of house price growth nudged lower for the second successive month to 10.6% from a peak of 11.1% in March. • Buyer interest in properties fell for the fifth consecutive month in April with the pace of decline increasing. Mortgage approvals to fund house purchase fell in April to their lowest level for 12 months and were 16% below the peak of 128,000 in November 2006 at 107,000. • Solid economic conditions and high employment support housing demand. The UK economy continued to grow at above its long-term average pace with GDP 2.9% higher on an annual basis in 2007 Q1. The number of people in employment has risen by 93,000 over the past year. • Higher interest rates and the negative trend in real earnings growth are likely to cause house price inflation to moderate over the remainder of 2007. The four interest rate rises since August 2006 have affected housing affordability, raising the monthly costs of servicing a mortgage. There has also been a squeeze on real earnings growth in recent months with headline retail price inflation of 4.8% exceeding average earnings growth of 4.5% over the year to March 2007. • Rising food prices are also reducing the income households have available for housing. Annual food price inflation currently stands at 6.0%, its highest rate for almost six years. Commenting, Martin Ellis, chief economist, said: "House prices increased by 0.3% in May. This is the smallest increase so farthis year and the third successive easing in the monthly growth rate. The recentslowing in monthly house price inflation, together with further evidence ofmoderation in housing market activity, suggests that the interest rate risessince last summer are having an impact on the market. Higher interest rates, the negative trend in real earnings growth and risingfood prices are likely to bite increasingly on householders' finances over thecoming months, curbing housing demand. House price inflation is expected tomoderate as a result. The market, however, remains supported by solid economicfoundations which, together with supply shortages, will continue to supportprices." Further evidence that housing market activity is easing ...... Buyer interest in properties fell for the fifth consecutive month in April withthe pace of decline increasing. (Source: RICS) Mortgage approvals to fund house purchase fell by 4% in April to a seasonallyadjusted 107,000. Approvals were at their lowest level for 12 months and 16%below the peak of 128,000 in November 2006. (Source: Bank of England) Housing market conditions still tight but signs of loosening ....... The stock of unsold property on estate agents' books rose in April for the firsttime in six months. This increase in stock contributed to the first fall in theratio of sales to available property stock since May 2006, indicating aloosening in market conditions. (Source: RICS) Nonetheless, market conditionsremain tight and supply shortages - both new and secondhand properties -continueto exert upward pressure on house prices. Solid economic conditions and high employment support housing demand ...... The UK economy continued to grow at above its long-term average pace in 2007 Q1with GDP 0.7% up on the previous quarter and 2.9% higher on an annual basis,according to the latest estimate. The good health of the economy has underpinneda 93,000 increase in the number of people in employment over the past year.(Source: ONS) Higher interest rates and the negative trend in real earnings growth are likelyto cause house price inflation to moderate ...... The four interest rate rises since August 2006 have affected housingaffordability, raising the monthly costs of servicing a mortgage. At the sametime, there has been a squeeze on real earnings growth in recent months.Headline retail price inflation of 4.8% exceeded average earnings growth of 4.5%over the year to March 2007. This fall in real earnings contrasts with realearnings growth of 1.6% during the previous year. (Average earnings rose by 4.0%over the year to March 2006 against headline retail price inflation of 2.4%).(Source: ONS) Rising food prices are also reducing the income households have available forhousing Annual food price inflation increased from 5.6% in March to 6.0% in April, itshighest rate for almost six years. Food prices have risen sharply worldwiderecently as an expanding biofuels industry, climate change and the growingprosperity of countries such as China and India have combined to push up theprices of agricultural commodities. These upward pressures on food prices arelikely to persist. NOTE: The 10.9% number is the quarterly year-on-year figure. This figureprovides a much better picture of underlying trends compared to a monthlyyear-on-year number as it smoothes out any short-term fluctuations. The Halifax House Price Index is prepared from information that we believe iscollated with care, but we do not make any statement as to its accuracy orcompleteness. We reserve the right to vary our methodology and to edit ordiscontinue the indices at any time for regulatory or other reasons. Personsseeking to place reliance on the indices for their own or third party commercialpurposes do so at their own risk. This information is provided by RNS The company news service from the London Stock Exchange