House prices surge ahead 22%

THE UK's property market showed little signs of cooling in July, with house prices rising 1.3%, according to the country's largest lender.

Halifax said the figure is slightly up on the 1.2% increase in June and represents a 22.1% rise on a year ago. The average price now stands at £161,831.

'The house price gains in June and July represent a clear step down from the 2.0% plus monthly price growth seen, on average, in the preceding six months,' said Martin Ellis, chief economist. 'These figures, along with other housing indicators, suggest that the market may be slowing.'

Halifax said that with interest rate increases expected first time buyers struggling to get on the house price ladder, house price growth would be 'tempered' over the remainder of 2004 and into 2005. But it added: 'A combination of a strong economy, a healthy labour market, below average interest rates, along with longer-term supply shortages, should continue to underpin the market.'

However, an index published by property wenbsite Rightmove showed asking values falling by an average £900 during the past three weeks.

It said the average price of a property dropped by 0.5% during the three weeks to the end of July to average £195,306.

It added that during the first week of the period prices in England and Wales had fallen by £673, followed by drops of £100 in each of the two following weeks.

The group said the fall provided 'incontrovertible evidence' that the market had turned and was finally responding to higher borrowing costs.

The group dismissed figures from Nationwide Building Society released last week showing that the market was re-accelerating with prices rising by 2.1% during July.

Rightmove also said the annual rate of house price inflation eased from 18% in early July to 17.6%.

Regionally, the strongest rise in July was seen in Yorkshire and Humberside at 2.1%, followed by the North at 1.9%.

The East Midlands saw the biggest fall of 1.9%, while prices dipped by 1.3% in Greater London.

The Bank of England's Monetary Policy Committee begins its two-day interest rate setting meeting today.

It is widely expected to raise rates from 4.5% to 4.75%, the fifth increase since November, as recent figures showed retail sales and consumer borrowing remained strong, while manufacturing grew at its fastest pace for nearly a decade.

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