House prices fall 2% in June

UK house prices fell by 2.0% in June compared to 2.5% in May, according to the Halifax House Price Index.

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.

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. Halifax 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 over the past year.

A combination of borrowers putting down bigger deposits and the significant increase in house prices in recent years has resulted in homeowners building up very 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.

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."