London tonic for house price inflation

Posted: 14 Aug 2006 10:40:23 GMT

Annual house price inflation for July stands at 5.4 per cent according to the latest Financial Times (FT) house price index.

Property prices in London continued to show above average strength with inflation of 9.9 per cent for the 12 months leading up to June.

Northern England is the closest to matching London's price increases with a 5.9 per cent rise.

The strength of the London market has for some time given the national average a notable fillip. The UK on the whole has developed a pattern of demand outweighing supply and this in itself is pushing up prices.

Gary Styles, economics director at Acadametrics, stated: "Monthly house price growth has eased significantly in the last three months as concerns about indebtedness, interest rates and bankruptcies have affected confidence.

"However the London market has shown only tentative signs of slowing in the face of this negative sentiment."

It remains to be seen whether the Bank of England's (BoE) decision to raise interest rates from 4.50 per cent to 4.75 per cent will have a significant impact on house price inflation.

However, the relatively slow response of the majority of mortgage lenders to match the BoE base rate may signal a calm response that will make little difference to the health of the property market.

The FT research - compiled by Acadametrics - showed that the east and west-midlands were the worst performing regions, with a 1.7 per cent and two per cent price rise respectively.



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