News: Halifax: 'Housing demand is weakening'

Thu, 07 Aug 08

The UK house price slump continued in July according to the latest monthly report from the Halifax (HBoS).

The UK's second largest lender said prices fell another 1.7% last month, taking the annual rate of decline down from 6.1% to 8.8%.

The Halifax calculates that the average house in the UK is now worth £177,351, back to the value seen in June 2006.

The bank said demand from home buyers had been 'significantly curbed' by the lack of mortgage funds, high prices and the squeeze on household finances.

Halifax pointed out that falls in real earnings, combined with rapid food and fuel price inflation are squeezing discretionary incomes, reducing the amount of money available for families to spend on housing.

However, Halifax noted that house prices are still more than a third higher than they were five years ago and that the latest decline in July is smaller than that recorded for either of the two previous months.

Indeed, economists have argued that UK house prices are in for a bout of deflation because price rises in recent years have so far outstripped income growth as to make new homes unaffordable for many.

Halifax noted that the average house price to income ratio fell to 5.25 times in May, the latest month for which it calculated that ratio. In July 2007, that ratio stood at 5.84 times income.

See also: A Guide to House Price Indices

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