House prices cooling down fast

HOUSING demand is starting to tail off and house price rises are slowing rapidly, figures from the Halifax bank showed today.

House prices rose by just 1.2% in June, the smallest gain since last November and well below the average monthly rise of 2.1% in the preceding six months.

The extent to which the market is cooling was underlined by the fact that in London, the area that has seen the fastest growth during the current market boom, prices rose just 1.8%, the smallest price rise of any region in the UK during the second quarter.

Martin Ellis, chief economist at the Halifax, which is part of the HBOS banking group and Britain's biggest mortgage lender, said higher interest rates and the fact that first-time buyers have gradually been priced out of the market were finally having an effect on house prices.

'The increased cost of borrowing, combined with the increasing difficulties that aspiring first-time buyers face in getting on to the housing ladder, are expected to exert downward pressure on housing market activity and house price inflation over the coming months,' he said.

Today‘s figures from the Halifax follow a succession of similar announcements from other mortgage lenders and numerous housebuilders.

Only yesterday, property agency Savills, which specialises in upmarket homes particularly in London, sounded the alarm about cooling house prices in the capital.

Chief executive Aubrey Adams said estate agents at Savills had begun to see a slowdown in activity with prices levelling off.

The evidence suggests, however, that while London house prices are starting to level off, outside London remains buoyant.

The Halifax‘s house price index shows Scotland recording the biggest rise (11.9%) while the next biggest gains were in the East Midlands (8.7%), the North (7.8%) and the North West (7.6%).

The average price in the West Midlands and East Anglia passed the £150,000 barrier for the first time. Only Greater London, the South East and the South West had previously been above this level – the average price of a house in the West Midlands is now £152,869 while in East Anglia it is £154,989.