16/01/2007

Cooling house prices after interest rate hikes

The latest figures on house price rises show that the market has cooled following the November interest rate rise.

The UK housing market survey published today revealed that the pace of increase remains strong, above the long term average of 21%, but it is the first real evidence that the November rate rise has started to take some of the heat out of the market.

RICS spokesman Ian Perry commented: "Interest rate rises have started to cool the housing market and last week's rise will have a further impact in the coming months, but the market remains strong.

"However, the rate rise will do nothing to aid home owners struggling with affordability conditions with more repossessions looming on the horizon.

"As we move further into the new year, consumers will begin to tighten their belts as finances come under pressure but rising wages and employment will continue to boost the economy and RICS expects interest rates to finish at 5.5% by year end.”

Although the market experienced its first slowdown since 2004, it remains firm, sustained by a booming city economy and a strong financial services sector.

House prices remain strong in London with few signs of the market easing up despite higher interest rates.

House price rises in the North have accelerated but outside London, the South East has started to slowdown.

Completed property sales rose to 28.5 per surveyor from 28.4 in September – the highest since August 2004. The ratio of completed sales compared to the stock of available property rose to 42.8% from 42.5 %.

This is the highest ratio in two years and a strong indicator of a still buoyant market.

New buyer enquiries stabilised in December reinforcing the strength of the underlying economy in light of the two quarter point interest rate hikes that have taken place since August.

(SP/KMcA)

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