Halifax Hse Price Index-Jan08

5 Feb 2008 08:00

HBOS PLC05 February 2008 Halifax House Price Index National Index January All Houses, All Buyers Index (1983=100) Index (seasonally adjusted) 638.4 Monthly Change 0.0% Annual Change 4.5% Standardised Average Price (seasonally adjusted) £197,244 Key Points • House prices were unchanged in January. Prices in the three months to January were 1.0% lower than in the previous quarter. This was the third successive fall in house prices on this basis. • House prices in January were 4.5% higher than a year earlier. The average price of a home in the UK has increased by £7,628 over the past year to £197,244. • There are continuing signs of weakness in housing market activity. The number of mortgage approvals to fund house purchase in the final three months of 2007 was 35% lower than during the same period a year earlier. • We predict that house prices will be flat in 2008. Sound economic fundamentals will support house prices in 2008. The economy is in good health; employment levels are high. The UK economy recorded its 62nd successive quarter of GDP growth in 2007 Q4, extending the longest running period of unbroken growth on record. The number of people in employment - a key driver of housing demand - has risen by 263,000 over the past year earlier to a record 29.36 million. • The Bank of England is likely to cut interest rates again over the coming months with a reduction probable this month. We predict that the MPC will cut the Bank Rate at least twice in 2008. Lower interest rates should help to prevent the economy slowing too sharply, therefore supporting the housing market. Commenting, Martin Ellis, chief economist, said: "House prices were unchanged in January. Prices in the three months to Januarywere 1.0% lower than in the previous quarter. Over the past year, the averageprice of a home in the UK has increased by £7,628 to £197,244. We expect sound economic fundamentals and lower interest rates to support houseprices. Nationally, we predict that house prices will be flat in 2008. The UKeconomy recorded its 62nd successive quarter of growth in 2007 Quarter 4,extending the longest running period of unbroken growth on record. The economyis expected to continue expanding during 2008, albeit at a slower pace than inthe past two years. Sustained growth should support a strong labour market. TheMPC is likely to cut the Bank Rate at least twice in 2008; further supportingboth the economy and housing demand." UK economy continues to grow at a healthy pace Gross domestic product (GDP) increased by 0.6% between 2007 Q3 and 2007 Q4,according to recently releases figures. (Source: ONS) This quarterly rise wasin line with the UK economy's long-term rate of growth, but slightly below the0.7% increase in 2007Q3. Growth for the whole of 2007 reached 3.1%, the fastestrate for three years. The UK economy has now grown for 62 consecutive quarters,extending the longest running period of unbroken growth on record. The UK isexpected to deliver its 65th successive quarter of GDP growth during 2008. Noother developed nation can match this performance. Employment - a key driver of housing demand - continues to rise There was a 175,000 increase in the number of people in employment during thethree months to November compared with the previous quarter. Employment was263,000 higher than a year earlier at a record 29.36 million. Unemployment alsofell by 13,000 over the past quarter (Source: ONS). The continuing strength ofthe labor market should continue to support the housing market. Lower interest rates to support the economy and the housing market The Bank of England is likely to cut interest rates again over the coming monthswith a reduction probable this month. We do, however, expect the Bank to take acautious approach to lowering rates because there are few signs that the economyis slowing any more rapidly than the MPC considers necessary to keepinflationary pressures in check over the medium term. We predict that the MPCwill cut the Bank Rate at least twice in 2008. Lower interest rates should helpto prevent the economy slowing too sharply, therefore supporting the housingmarket. Signs of a possible stabilisation in housing market activity The number of mortgage approvals to fund house purchase in the final threemonths of 2007 was 35% lower than during the same period a year earlier,indicating a significant fall in housing market activity (Source: Bank ofEngland). The number of new buyer enquiries has also been in decline over thepast year (Source: RICS). There has, however, been a slowing in the rate ofdecline of new buyer enquiries during the past three months, suggesting that thedownturn in activity may be beginning to stabilise. This information is provided by RNS The company news service from the London Stock Exchange