Halifax Hse Price Index-Dec07

RNS Number:2259L
HBOS PLC
08 January 2008



                             Halifax House Price Index

        National Index                                       December



                      All Houses, All Buyers Index (1983=100)
Index (seasonally adjusted) 637.7     Monthly Change 1.3       Annual Change 5.2

           Standardised Average Price (seasonally adjusted) �197,039


                                  Key Points
 
        * House prices increased by 1.3% in December following three 
          successive monthly falls. Prices in Quarter 4 were marginally 
          lower than in Quarter 3, down -0.8%.  House prices in December 
          were 5.2% higher than a year earlier with the average price 
          of a home in the UK increasing by �11,759 over the year to 
          �197,039.

        * The annual increase of 5.2% made 2007 only the second year 
          since 2001 when prices have risen by less than the long-term 
          average of 8%.

        * A mixed pattern of monthly price rises and falls - as seen 
          over the past few months - typically characterises a subdued 
          housing market.  For example, there were six monthly falls 
          and six monthly increases between July 2004 and June 2005 as 
          the market slowed in response to a series of interest rate 
          rises during 2004. There was a similar pattern in 2000.

        * We predict that house prices will be flat in 2008. A slower 
          housing market must be taken in context, however. House prices 
          have risen by 182% over the past ten years from an average 
          price of �70,000 at the end of 1997 to �197,000 today.

        * Sound economic fundamentals will support house prices in 2008. 
          The economy is in good health; employment levels are high. The 
          UK economy is expected to deliver its 65th successive quarter 
          of GDP growth during 2008, extending the longest running period 
          of unbroken growth on record.  No other developed nation can 
          match this performance.

        * The Bank of England is expected to follow last month's interest            
          rate cut with further reductions over the coming months in 
          order to prevent anything more than a gradual economic slowdown.  
          The MPC is likely to cut the Bank Rate at least twice in 2008. 
          Lower interest rates will help to support the housing market.



Commenting, Martin Ellis, chief economist, said:

"House prices increased by 1.3 per cent in December, reversing some of the
declines recorded in the preceding three months.  This mixed pattern of monthly
price rises and falls is a typical characteristic of a subdued market.

Overall, the housing market continued to slow in the final quarter of 2007 with
prices slightly lower than in the preceding quarter. Higher mortgage repayments
in response to the series of five interest rate increases between August 2006
and July 2007 and falling real earnings have put pressure on households' income,
resulting in a slowdown in both house price growth and activity in recent
months.

Sound economic fundamentals and lower interest rates will support house prices
in 2008. The UK economy is expected to deliver its 65th successive quarter of
GDP growth during the year, extending the longest running period of unbroken
growth on record.  The MPC is likely to follow up last month's cut by reducing
the Bank Rate at least twice in 2008.  House prices are predicted to be flat
during 2008."


Prices in the final quarter of 2007 were marginally lower than in the third
quarter

House prices in Quarter 4 were 0.8% lower than in Quarter 3.  House price growth
maintained a steady downward trend during 2007. There was a strong start to the
year with prices rising by 2.9% between 2006 Quarter 4 and 2007 Quarter 1.  The
quarterly rate of increase eased during the succeeding quarters of the year.


A mixed pattern of monthly price rises typically characterizes a more subdued
market

For example, there were six monthly falls and six monthly increases between July
2004 and June 2005 as the market slowed in response to a series of interest rate
rises during 2004. There were also five monthly falls during 2000 as annual
house price inflation eased from 15% in February 2000 to 2.5% in February 2001.


Average price of a home rose by �11,759 during 2007

House prices increased by 5.2% during 2007. The average price of a home in the
UK increased by �11,759 over the year from �185,280 to �197,039.  The annual
increase of 5.2% made 2007 only the second year since 2001 when prices have
risen by less than the long-term average of 8%.


A robust economy and high employment provide strong underpinnings for the
housing market

The latest figures confirm that gross domestic product (GDP) increased by 0.7%
between 2007 Q2 and 2007 Q3.  This was the eighth consecutive quarterly increase
above the long-term average rate of 0.6%. (Source: ONS)  The UK economy is
expected to deliver its 65th successive quarter of GDP growth during 2008,
extending the longest running period of unbroken growth on record.  No other
developed nation can match this performance.


But economic growth is likely to slow to below its long-term average pace in
2008

The UK economy is nonetheless forecast to slow with growth of 2.0%-2.25% in 2008
compared with around 3.0% in 2007.  The long term average rate is 2.5%.
Domestically, both consumer and investment spending growth are likely to
moderate in response to earlier interest rate rises and some tightening in
credit availability. In 2008 global economic growth is likely to slow,
reflecting a weaker US economy constrained by the sub-prime lending crisis.


Employment to stay at a record high in 2008

The number of people in employment increased by 114,000 during the three months
to October compared with the previous quarter.  On an annual basis, employment
was 226,000 higher at 29.29 million. (Source: ONS) Employment levels - a key
driver of housing demand - will stay at a record high despite the expected
slowdown in economic activity this year.


Further rate cuts expected in 2008

We expect the Bank of England to cut rates again over the coming months to
insulate the economy from anything more than a gradual economic slowdown.  We
predict that the MPC will cut the Bank Rate at least twice in 2008.




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

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