Bank Of Scotland International Publishes February House Price Index

by Philip Morton, Investors Offshore.com

11 March 2008

Bank of Scotland International has this week released its International House Price Index for February 2008.

According to the Index, house prices fell by 0.3% during February. Prices in the three months to February were reportedly 0.2% higher than in the previous quarter.

However, house prices in February were 4.2% higher than a year earlier, with the average price of a home in the UK increasing by GBP4,390 over the past year to GBP196,649.

Bank of Scotland International went on to predict that house prices will be flat during 2008 as a whole. The bank explained that:

"Sound economic fundamentals are supporting house prices, and 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, and Bank of Scotland International further speculated that the MPC will cut the Bank Rate at least twice more in 2008.

The Bank of Scotland International research also showed that residential stamp duty revenue has more than doubled over the past five years from GBP2.7bn in 2001/02 to GBP6.4bn 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 GBP250,000 threshold was 1.8m; by 2007 this had increased by 201% to 5.5m.

The average stamp duty bill was worth more than 20% of average full-time earnings in 91% of London LAs (Local Authorities) and 61% of LAs in the South East in 2007.

Commenting, Martin Ellis, chief economist, confirmed that:

"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 GBP4,390 to GBP196,649."

"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."

The research also showed that the number of properties in the higher stamp duty bands of GBP250,000 and GBP500,000 has increased dramatically in the past five years

In 2002, the number of properties in the UK valued above the GBP250,000 threshold was 1.8mn; by 2007 this had increased by 201% to 5.5mn. Properties above the GBP500,000 threshold had increased by 337% to 1.0m.

Bank of Scotland International estimates that 26% of privately owned properties in the UK are now valued above the GBP250,000 stamp duty threshold compared to 9% in 2002; this includes 5% of properties that are valued above the GBP500,000 threshold, compared to 1% five years ago.

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