63GF Natwest.m 24

    RNS Number : 7275Y
  HBOS PLC
  09 July 2008
   


    Halifax House Price Index
 National Index  June 2008


                       All Houses, All Buyers Index (1983=100)
 Index (seasonally adjusted) 583.7    Monthly Change -2.0%       Annual Change -6.1%
             Standardised Average Price (seasonally adjusted)  �180,344


 Key Points
 * On an annual basis, house prices in June were 6.1% lower. UK average prices
 have returned to the level they were at in August 2006. The UK average price
 remains slightly higher (2%) than two years' ago, more than 10% higher than
 in June 2005 and almost 40% above that in June 2003. 
  
 * House prices fell by 2.0% in June compared to 2.5% in May, a slight
 moderation in the recent rate of decline. 


 * UK house prices have risen by 196% (�119,379) since the trough of the 1990s
 housing market downturn in July 1995. Prices increased for 48 consecutive
 quarters between 1995 Q4 and 2007 Q3 with the exceptions of 2000 Q2 when
 prices fell slightly (-0.1%) and 2005 Q2 (0.0%).


 * The housing market continues to be underpinned by sound fundamentals. All
 our research indicates that the labour market is the key driver of the
 housing market. Employment is at a record high of 29.55 million. Total
 employment increased by 76,000 over the three months to April compared with
 the previous quarter and by 446,000 ove




    Commenting, Martin Ellis, chief economist, said:

    "House prices have declined by 6.1% over the past year. Nonetheless, the average UK price remains slightly higher than two years' ago
and is appreciably stronger than three or four years ago.
    House prices fell by 2.0% in June compared to 2.5% in May, a slight moderation in the recent rate of decline.

    The average UK price has risen by 150% during the past decade from �72,096 to �180,344; an increase of �108,248. Prices have risen by
196% (�119,379) since the trough of the 1990s housing market downturn in July 1995.

    A strong labour market, low interest rates and a shortage of new houses underpin housing valuations. Our research shows that the labour
market is the key driver of the housing market. Employment is at a record high."

    Annual house price inflation at -6.1% in June
    The annual rate of house price inflation - measured by the average price over the three latest months compared with the same period a
year earlier - is now at -6.1% in June. House prices overall rose by 5.2% in 2007.

    Housing demand has fallen for a number of reasons**
    The decline in prices is driven by a squeeze on spending power, affordability difficulties due to the rapid rise in house prices in the
last few years and the decline in credit availability resulting from the crisis in the financial markets. These factors have curbed housing
demand. There has been a slight fall in 'real' earnings over the past year. Average earnings rose by 3.8% in the year to April compared to a
4.2% increase in the headline rate of retail price inflation over the same period. Significant increases in both fuel (12%) and food prices
(8%) over the past year have helped to reduce the discretionary income available to households to fund house purchase.  

    Strong labour market underpins the housing market
    The labour market is the key driver of the housing market. Employment is at a record high of 29.55 million. Total employment increased
by 76,000 over the three months to April compared with the previous quarter and by 446,000 over the past year.
    We expect the UK economy to slow further in 2008, with a further rise in unemployment and low interest rates, accepting that
inflationary pressures will restrict the MPC's ability to reduce base rates below current levels.  


    HOUSING EQUITY

    The value of UK private housing stock more than tripled between 1997 and 2007 to reach a total of �4 trillion (�4,000 billion) at the
end of 2007. Housing equity has increased from �870bn in 1997 to �2,800bn in 2007. Accordingly, the average level of housing equity rose
from �45,000 at the end of 1997 to �125,000 ten years later. Over the period, housing assets grew by 208% against a 178% rise in outstanding
mortgage debt. Housing assets increased by more than mortgage debt levels in each year between 1995 and 2007.

    Buyers have been putting down bigger deposits than in previous cycles. 56% of new borrowers put down a deposit of more than 10% in 1989
and 1990. By contrast, 82% of all new borrowers put down a deposit of more than 10% of the house price during the final quarter of 2007.
(Source: CML)

    There have also been far fewer 100% plus loans taken out by first-time buyers (FTBs) recently compared with the late 1980s and early
1990s: 5% of all FTB loans in 2007 against 35% in 1990. (Source: CML)  




    An estimated 300,000 FTBs entered the market in 2007, the lowest since 1980. This compares with an estimated 900,000 at the peak in
1988.  FTBs have also declined sharply as a proportion of all borrowers taking out a new mortgage to finance house purchase, accounting for
30% in 2007 compared to 51-52% in 1989 and 1990. (FTBs accounted for 14% of all new mortgages - i.e. including remortgages - in 2007 against
45% in 1993 - the earliest available data on this basis.)

    There was a long period of sustained house price growth between the mid 1990s and the summer of 2007. Prices increased for 48
consecutive quarters between 1995 Q4 and 2007 Q3 with the exceptions of 2000 Q2 when prices fell slightly (-0.1%) and 2005 Q2 (0.0%).

    The combination of borrowers putting down bigger deposits and the substantial increase in house prices in recent years has resulted in
homeowners building up substantial levels of equity in their homes. The Bank of England recently reported that 70% of mortgage holders have
at least 50% equity in their homes. (Source: BoE Financial Stability Report, April 2008).

    The number of housing transactions in recent years has been significantly lower than at the height of the late 1980s housing boom. There
were 1.17 million house sales in England & Wales in 2007 and an average of 1.16 million in the last three years (2005-2007). This is nearly
a third lower than in 1988 when there were an estimated 1.7 million transactions. Transactions have also been significantly lower as a
proportion of the housing stock in recent years; averaging 7% during 2005-2007 compared to 12% between 1986 and 1988.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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