While the recession has narrowed inequality in income levels between regions, the ratio of house prices - where heaviest falls have been in the South-east - to income means homes are more affordable than they have been for 20 years, Mr Foley said.
That conclusion is likely to be a relief to the Government. Speaking before the report was published, Stephen Dorrell, Financial Secretary to the Treasury, said: 'It is not by any means self-evident that some moderation of house prices from the level they reached two years ago is necessarily a bad thing, especially for young couples looking for houses.'
The Lloyds study concludes, however, that consumers in the South-east prefer to save rather than spend. 'This does not augur well for a recovery in consumer spending,' Mr Foley said.
Responding to a prediction by Morgan Grenfell, the merchant bank, that southern householders could see property values fall by a further 15 per cent, John Townend, chairman of the Tory backbench finance committee, said: 'If that is right, it confirms that the danger for the economy is that a further fall in house prices could push us into slump.'
The Retail Consortium, representing about 250 shops, will this week join a campaign by estate agents to call for the complete abolition of stamp duty on house purchases. But a Treasury spokeswoman said yesterday: 'Our present position on stamp duty is as it's always been.'
Reaffirming that the Government is unlikely to propose any house market revival package in the near future, Mr Dorrell said: 'Those who talk about housing seem to me to be concentrating on housing to the exclusion of a wide range of other things that act on the thing that really matters - which isn't the housing market, unless you're buying and selling a house.
'The thing that really matters from an economic point of view is confidence. Those who argue that we have to do something about housing do so because they say that is the only way of stimulating confidence. This does not stand up to a moment's serious thought. I do not dispute that housing plays a part in the circle of confidence. But the idea that it is the only factor impinging on confidence is fourth of August madness without thinking about the arguments.
'Another very important influence on confidence is the credibility of the Government's sound money policy. If we were seen to be doing something about housing at the expense of sound money, I actually think interest rates would go up and the recession would be prolonged. Everybody would dismiss it as the Government copping out.'