Halifax 9.375bd Regulatory News (HALP)

5 Sep 2007 08:00

HBOS PLC05 September 2007 Halifax House Price Index National Index August 2007 All Houses, All Buyers Index (1983=100) Index (seasonally adjusted) 646.6 Monthly Change 0.4% Annual Change 11.4% Standardised Average Price (seasonally adjusted) £199,770 Key Points • House prices increased by 0.4% in August. This is the third month inthe last four that house prices have grown by less than 0.5%, confirming thathouse price inflation is slowing. • The three monthly increase in house prices - a good indicator of theunderlying trend - has fallen from 4.5% in March to 1.6% in August. • The annual rate edged higher to 11.4% in August from 11.2% in July. The annual rate should decline over the coming months as the strong monthlyhouse price gains last summer and autumn drop out of the year-on-yearcomparisons. • Mortgage approvals to fund house purchase in the three months to Julywere 9% lower than during the recent three month peak during September toNovember 2006. The level of new buyer interest in purchasing a house fell forthe eighth successive month in July, marking increasing caution amongstpotential buyers. • A healthy economy and strong labour market continue to underpinhousing demand. Gross domestic product (GDP) increased by 0.8% between Q1 andQ2, above its long-term average pace (0.7%). Employment continued to riseagainst the background of healthy economic growth in the three months to Junewith the total number 93,000 higher than in the previous quarter. • House price inflation is expected to ease over the rest of 2007. Theincrease in mortgage rates since last summer is having an effect on housingaffordability and will bite further during the coming months. Negative realearnings growth so far this year - average earnings increased by 3.3% over theyear to June 2007 against a 4.4% rise in the Retail Price Index - and risingfood prices will also reduce the income households have available for housing. Commenting, Martin Ellis, Chief Economist, said: "House prices increased by 0.4 per cent in August. This is the third month inthe last four that house prices have risen by less than 0.5 per cent. Whilstthe market remains robust, this provides further evidence that house priceinflation has slowed since the beginning of the year. The downward trend in house price growth is expected to continue over theremainder of 2007 as the five interest rate rises since last summer have anincreasing impact on household spending and housing demand. Sound economicfundamentals, high levels of employment and a shortage in the number ofproperties available for sale will, however, continue to support house prices." House price growth is slowing..... The three monthly increase in house prices - a good indicator of the underlyingtrend - has slowed sharply over the past few months. Prices rose by 1.6%between June and August compared with a 4.5% in the three months to March. .....and housing market activity also continues to ease Mortgage approvals to fund house purchase held steady at a seasonally adjusted115,000 in July. Nonetheless, approvals in the three months to July were 9%lower than during the recent three month peak during September to November 2006.(Source: Bank of England) The level of new buyer interest in purchasing a house fell for the eighthsuccessive month in July, indicating that potential buyers have become morecautious. Completed property sales in July were 10% lower than a year ago.(Source: RICS) Interest rate effect to bite increasingly in the coming months ...... The increase in mortgage rates since last summer is having an effect on housingaffordability and will bite further during the coming months. Negative realearnings growth in the first six months of this year and rising food prices isalso reducing the income households have available for housing. Average earningsincreased by 3.3% over the year to June 2007; 1.1 percentage points lower thanthe increase in the Retail Price Index over the same period (4.4%). Economic fundamentals are sound Strong economic fundamentals continue to support the housing market. Latestofficial figures confirm that gross domestic product (GDP) increased by 0.8%between Q1 and Q2, above its long-term average pace (0.7%). Employment continued to rise against the background of healthy economic growthin the three months to June with the total number 93,000 higher than in theprevious quarter. The total number in employment stands at a record 29.1 million(Source: ONS) A sound economic background, together with an ongoing shortage of both newhousebuilding and secondhand properties for sale, should continue to supporthouse prices. NOTE: The 11.4% 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