HALP Halifax 9.375bd

RNS Number:4580P
HBOS PLC
06 March 2008

                               Halifax House Price Index

                   National Index                          February

                       All Houses, All Buyers Index (1983=100)
Index (seasonally adjusted) 636.5       Monthly Change -0.3%  Annual Change 4.2%
            Standardised Average Price (seasonally adjusted)  �196,649


Key Points

*   House prices fell by 0.3% in February. Prices in the three months to 
    February were 0.2% higher than in the previous quarter.

*   House prices in February were 4.2% higher than a year earlier. The average 
    price of a home in the UK has increased by �4,390 over the past year to 
    �196,649.

*   We predict that house prices will be flat during 2008 as a whole. Sound 
    economic fundamentals are supporting house prices. The number of people in 
    employment - a very important driver of housing demand - has risen by 
    296,000 over the past year to a record 29.40 million. Lower interest rates 
    are also helping to support the economy and the housing market. We predict 
    that the MPC will cut Bank Rate at least twice more in 2008.

*   Halifax research shows that residential stamp duty revenue has more than 
    doubled over the past five years from �2.7bn in 2001/02 to �6.4bn in 
    2006/07.  The amount raised at the higher stamp duty rates of 3% and 4% 
    accounted for 79% of all residential stamp duty revenue in 2006/07 compared 
    with 61% in 2001/02. In 2002 the number of properties in the UK valued above 
    the �250,000 threshold was 1.8m; by 2007 this had increased by 201% to 5.5m.

*   The average home buyer in nearly one in three (29%) of local authorities 
    (LAs) needs to set aside the equivalent of more than 20% of local average 
    annual gross full-time earnings to pay the stamp duty bill associated with
    buying their new home. The average stamp duty bill was worth more than 20% 
    of average full-time earnings in 91% of London LAs and 61% of LAs in the 
    South East in 2007.


Commenting, Martin Ellis, chief economist, said:

"House prices fell by 0.3% in February. Prices in the three months to February,
however, were marginally (0.2%) higher than in the previous quarter. Over the
past year, the average price of a home in the UK has increased by �4,390 to
�196,649.

Whilst the housing market has slowed over the past six months, it is supported
by sound economic fundamentals. Interest rate cuts by the Bank of England are
also helping to underpin house prices. Nationally, we predict that house prices
will be flat in 2008."

UK economy slows but is still growing at its long-term average pace

The latest official figures confirm that the UK's gross domestic product (GDP)
increased by 0.6% between 2007 Q3 and 2007 Q4.  This is in line with the
economy's long-term rate of growth, but slightly below the 0.7% increase in 2007
Q3.

Strength of the labour market should continue to support the housing market

At a record 29.4 million, the number of people in employment increased by
175,000 between 2007 Q3 and 2007 Q4.  Employment was 296,000 higher than a year
earlier. Unemployment fell by 61,000 over the same period (Source: ONS).

Bank of England rate cuts should also support the economy and the housing market

We expect the Bank of England to follow up the two interest rates cuts since
December with further reductions during the remainder of the year.  The MPC is,
however, likely to adopt a cautious approach due to concerns over inflationary
pressures and an absence of signs that the economy is slowing sharply.
Nonetheless, we predict that the MPC will cut the Bank Rate at least twice more
in 2008. Lower interest rates should prevent the economy slowing too sharply,
helping to support the housing market.

Housing market activity has declined significantly in the last 12 months

There has been a significant decline in housing market activity over the past
year. For example, completed property sales in January were down 16% on an
annual basis (Source: RICS). The number of mortgage approvals to fund house
purchase in January 2008 was 39% lower than a year earlier (Source: Bank of
England).

There was, however, a 3% rise in mortgage approvals between December and
January, on a seasonally adjusted basis.  That may indicate a possible
stabilisation in activity, albeit at a much lower level than in recent years.

Stamp duty revenue has more than doubled over the past five years

Halifax research shows that total stamp duty revenue from residential property
sales rose by 40% (�1.8bn) in 2006/07 to a record �6.4bn. Over the past five
years, annual residential stamp duty revenue has more than doubled with a 140%
rise from �2.7bn in 2001/02 to �6.4bn in 2006/07. Estimates of residential stamp
duty revenue for 2007/08, based on government projections in the latest
Pre-Budget Report, are for a 14% rise to �7.3bn.

Higher stamp duty bands generate nearly 80% of total residential stamp duty
revenue

Residential stamp duty revenue raised at the higher stamp duty bands accounted
for 79% of all residential stamp duty revenue in 2006/07, at �5.1bn. Five years
ago in 2001/02, the higher stamp duty bands contributed 61% of total residential
stamp duty revenue.

Number of properties in the higher stamp duty bands of �250,000 and �500,000 has
increased dramatically in the past five years

In 2002 the number of properties in the UK valued above the �250,000 threshold
was 1.8m; by 2007 this had increased by 201% to 5.5m. Properties above the
�500,000 threshold had increased by 337% to 1.0m. Halifax estimates that 26% of
privately owned properties in the UK are now valued above the �250,000 stamp
duty threshold compared to 9% in 2002; this includes 5% of properties that are
valued above the �500,000 threshold, compared to 1% five years ago.

The average UK home buyer pays 7% of average earnings in stamp duty

Across the UK, the average home buyer paid a stamp duty bill of �1,971 in 2007,
equivalent to 7% of average annual full-time earnings. Five years ago in 2002,
the average stamp duty bill of �1,211 was equivalent to 5% of earnings. By
region, stamp duty was highest as a percentage of full-time earnings in 2007 in
the South East (23%) and London (21%) and lowest in Scotland (5%). Five years
ago, the average home buyer in all regions paid the equivalent of less than 10%
of average annual full-time earnings for residential stamp duty.

Home buyers in 29% of local authorities (LAs) have a stamp duty bill equivalent
to more than 20% of average annual gross earnings

The average home buyer in nearly one in three (29%) of local authorities (LAs) -
118 out of 405 - needs to set aside the equivalent of more than 20% of local
average annual gross full-time earnings to pay the stamp duty bill associated
with buying their new home. Five years ago, in 2002, the average stamp duty bill
was equivalent to more than 20% of average annual full-time earnings in only one
in 20 (5%) of LAs - 19 out of 405.

Stamp duty bills are highest relative to earnings in London and the South East

The average stamp duty bill was worth more than 20% of average full-time
earnings in 91% of London LAs (29 out of 32) and 61% of LAs in the South East
(41 out of 67) in 2007. In 2002, only 25% of London LAs (8) and 12% of LAs (8)
in the South East had an average stamp duty bill of more than 20% of full-time
earnings.

Higher stamp duty thresholds need to be raised significantly

If the higher stamp duty thresholds were increased in line with house price
inflation since July 1997 - when the �250,000 and �500,000 stamp duty thresholds
were introduced their respective threshold would now stand at �720,000 and
�1,440,000. If the lowest stamp duty threshold had been increased in line with
house price inflation since March 1993, it would now stand at �191,000.  This
would be �66,000 above its current level of �125,000.


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