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July is last gasp of house price boom.

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HOUSE prices edged up at their slowest rate for 18 months during July as higher interest rates hit demand for property.

The cost of a home in England and Wales rose by only 0.1% to put the average property price at pounds 176,300, according to property research group Hometrack.

At the same time, the annual rate of house price inflation also eased for the third month in a row, dropping to 5.9%, down from 6.4% in June.

Hometrack said the change in market conditions had finally impacted on the London market, which it said had been the engine for house price growth during the past year.

Prices in the capital rose by only 0.2% during the month, well down on the high of 1.8% reached in March this year.

Overall, prices rose in only three regions - London, the South East and Wales - during July while they remained static in five regions.

Prices fell in both the East Midlands and Yorkshire and Humberside during the month, dropping by 0.2% and 0.1% respectively.

Richard Donnell, Hometrack's director of research, said, "It was inevitable that the steady increase in interest rates which began last year would ultimately impact on levels of housing demand right across the market - a trend that has been exacerbated by the seasonal slowdown in activity over the summer.

"However, the slowdown has been accelerated by a rise in the supply of housing for sale over recent months.

"While the growth in supply across the country appears to have moderated, we expect demand to remain weak over the second half of the year as the impact of higher interest rates continues to feed into the market."

He added that the increase in the number of homes being put up for sale was probably due to estate agents encouraging people to market their homes ahead of the previous date for the introduction of Home Information Packs, which was June 1.

The figures add to a raft of data suggesting the property market has run out of steam.

Last week the Land Registry said prices rose by only 0.4% during June, while Nationwide Building Society recently said house prices rose by only 0.1% in July, the slowest rate for more than a year.

The Royal Institution of Chartered Surveyors has also pointed to a slowdown, saying house price inflation more than halved in June, as new buyer enquiries fell at their fastest rate since February 2006.

Hometrack said the average time it took to sell a home increased to 6.5 weeks in July, up from a recent low of 5.8 weeks in May, with sellers now getting about 95% of their asking price.

House prices are expected to flatten out in August as the Bank of England's higher interest rates "medicine" begins to impact on the market, according to another report.

In a "last gasp of the price boom", average UK prices would rise by 0.94% in July to a peak of pounds 182,748, from pounds 181,039 in June, before falling 0.34% to pounds 182,134 in August, said estate agency Your Move.

David Newnes, managing director of Your Move, said the predictions were down to hikes in Monetary Policy Committee (MPC) interest rates stemming buyers' capacity to take out a mortgage.

He said, "Successive interest rate rises which might have reined in house price growth have not actually led to a fall in prices, but the August prediction shows the first signs that the MPC medicine is starting to bite through on price growth.

"Now that many borrowers are coming off those cheap fixed-rate deals and having to pay a higher rate of interest, the MPC's rate rises are starting to have an effect by cooling price rises, which is exactly what they wanted to achieve."

The housing market should remain "robust" in the long term, he said, but Your Move also predicted a "sober" September, with home buyers starting to ask for larger discounts relative to asking price.

The percentage of asking price to agreed price eased from 92.7% in June to below the psychologically important 90% mark of 89.1% in July, according to the agency's report.

Mr Newnes added, "While the introduction of the very watered down HIPs next week will have little or no impact, the housing market is now starting to show the first signs of real reaction.

"We predict Land Registry data will show an increase in prices again in July - the last gasp of the price boom - before starting to drop back slightly in August."
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Title Annotation:Features
Publication:Western Mail (Cardiff, Wales)
Geographic Code:4EUUK
Date:Aug 4, 2007
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