House prices leap 2.1% - official

THE UK property market gathered pace over the summer, according to new Government figures, despite widespread predictions that the boom had ended.

The rate of annual house price inflation increased from 13.9% in June to 14.3% in July. Month-on-month, prices leapt 2.1% to an average £177,474, although the Office of the Deputy Prime Minister (ODPM) which published the figures warned that the numbers have not been seasonally adjusted.

The study, which works on older data, reflects findings from the UK's largest lenders - their surveys also revealed a buoyant market in July. However, they have since recorded a sharp slowdown in August. Halifax said house prices fell 0.6% in August while Nationwide recorded a 0.1% increase compared to 2.1% in July.

Economists say demand has been hit by rising interest rates. The base rate has risen from 3.5% to 4.75% since November, with the last quarter-point rise coming in August.

The figures from the ODPM suggested the market could be undermined by falling demand from first-time buyers - the average annual price rise slowed from 20.8% to 17.6% in July, taking the typical amount paid to £143,270.

'We continue to believe that it is premature to talk of a meaningful period of house price declines,' said Simon Rubinsohn, chief economist at broker Gerrard. 'The inflation rate may have peaked but with the economy in good shape, prices are likely to continue to edge upwards over the balance of the year.'

The ODPM survey broadly reflected a booming market. All the home countries, except Scotland, saw an increase in the rate of house price rises. House price inflation in England rose from 13.1% in June to 13.4% in July, while the rate in Wales rose from 26.1% to 30.4%. In Northern Ireland, the rate leapt from 6.4% to 14.4%.

Price rises in Scotland remained high, even though the rate fell from 23.8% to 22.3%.

The property market gathered pace in every English region except London, Yorkshire and the Humber. The highest annual increases were in the North East (29.5%) and the North West (26%).

House price inflation in London fell from 11.8% to 8.4%. The South East had the lowest rate at 8.2%.

Detatched properties were most in demand, with prices rising 3.2% month-on-month, while semi-detached prices saw a 2.4% increase.

The ODPM began publishing house price figures last year in an attempt to provide a definitive index for the market, where the picture is confused by a plethora of surveys. Critics say the data is too old for the index to gain true respect.

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