Halifax House Price Index

TIDM68FF

RNS Number : 9819T
HBOS PLC
07 October 2010

+----------------------------+----------------------------+
| National Index | September 2010 |
+----------------------------+----------------------------+

+----------+------------------+-------------------+-----------------+-------------------------+
| | All Houses, All Buyers Index (1983=100) |
+----------+----------------------------------------------------------------------------------+
| Annual Change 2.6% | Quarterly Change | Monthly Change | |
| | -0.9% | -3.6% | |
+-----------------------------+-------------------+-----------------+-------------------------+
| | Standardised Average Price (seasonally adjusted) GBP162,096 |
+----------+----------------------------------------------------------------------------------+
| | | | | |
+----------+------------------+-------------------+-----------------+-------------------------+

Commenting, Martin Ellis, housing economist, said:
"Looking at quarterly figures - a better measure of the underlying trend, house
prices in the third quarter of 2010 were 0.9% lower than in the second quarter
of 2010. This rate of decline is significantly slower than the quarterly
changes of between -5% and -6% that were seen in the second half of 2008. It is
therefore far too early to conclude that September's monthly 3.6% fall is the
beginning of a sustained period of declining house prices.
"A shortage of properties for sale contributed to an imbalance between supply
and demand and was a key factor driving up house prices last year. An increase
in the number of properties available for sale in recent months has reduced the
imbalance. At the same time, renewed uncertainty about the economy and jobs has
caused consumer confidence to falter recently, dampening the demand for home
purchase. Together, these factors have been exerting some downward pressure on
prices in recent months. In addition, volatility of the month on month measure
has increased due to the low transaction levels across the market; this
underlines the difficulty of getting a clear reading on the current state of the
housing market.
"Prospects for the housing market remain uncertain. Earnings growth is expected
to be very modest over the next year, tax rises are on the way and more people
are putting their homes on the market. These will all be constraints on the
market, dampening house prices. On the positive side, we expect interest rates
to remain very low for some time, which will underpin the improved affordability
position for homeowners."
Key facts

· Prices in the third quarter of 2010 were 0.9% lower than in the second
quarter of 2010. Quarterly house price data provides a clearer indication of
the overall market trends, smoothing out the volatility caused by reduced number
of monthly transactions in all house prices indices' monthly figures.The
underlying pace of house price growth has turned moderately negative in recent
months. Prices fell by a modest 0.3% between the first and second quarters of
the year. By comparison, the quarterly rate of decline was consistently in
excess of -5% throughout the second half of 2008.

· Housing market activity is softening. Bank of England industry-wide
figures show that the number of mortgages approved to finance house purchase
fell for the fourth consecutive month in August, on a seasonally adjusted basis.
The number of approvals was at it its lowest level in the past six months, at
47,372.

· House prices still remain higher than a year ago. Prices in September
were 2.6% higher on an annual basis as measured by the average for the latest
three months against the same period a year earlier. This continues the recent
downward trend from a high of 6.9% in May and was below the 4.6% increase in
August.

· Reduced demand and higher supply puts downward pressure on prices. A
shortage of properties for sale in 2009 contributed to an imbalance between
supply and demand and was a key factor driving up house prices last year. An
increase in the number of properties available for sale in recent months,
together with a decline in demand, has reduced the imbalance, putting some
downward pressure on prices in recent months. New sales instructions with
estate agents increased for the seventh successive month in August whilst demand
- measured by new buyer enquiries - fell for the third month in a row, according
to the latest RICS monthly survey.

· The low interest rate environment has reduced the burden of servicing
mortgage debt. Typical mortgage payments for a new borrower have fallen from a
peak of 48% of average disposable earnings in mid 2007 to 30% in mid 2010. This
key measure of affordability is at a better level than the long-term average
over the past 25 years (37%) and is an important factor supporting housing
demand.

The Halifax House Price Index is prepared from information that we believe is
collated with care, but we do not make any statement as to its accuracy or
completeness. We reserve the right to vary our methodology and to edit or
discontinue/withdraw this, or any other report. Any use of this report for an
individual's own or third party commercial purposes is done entirely at the risk
of the person making such use and solely the responsibility of the person or
persons making such reliance. c Bank of Scotland plc all rights reserved 2010.

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