Halifax: House prices fall 0.3% in February

House prices fell by 0.3% in February, prices in the three months to February were 0.2% higher than in the previous quarter, according to the Halifax house Price Index.

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.

Halifax predicts 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. Halifax 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."