London house prices levelling off

ONE of London's biggest sellers of upmarket homes today sounded the alarm about cooling house prices in the capital.

Property agency Savills, headed by chief executive Aubrey Adams, said its agents had 'seen recently a slowdown in activity with prices levelling off'.

Delivering a trading statement ahead of half-year results, Savills noted that while markets outside London remained buoyant and the number of homes under offer was 'encouragingly high', deals were taking longer to complete.

The news is the first firm evidence of a cooling in the market for 'second-hand' homes, by far the biggest part of the housing market, following a number of housebuilders' warnings of a slowdown in the past few weeks.

It may allay fears that the Bank of England will again raise interest rates - currently at 4.5% - later this month after mortgage lender Nationwide said house prices were on course for a 15% rise this year despite a slowdown last month.

Prices have stagnated for new houses worth more than £300,000 in the South East while Wimpey said yesterday that Midlands homes worth more than £250,000 were also showing little price increases. Builders warned against the Bank increasing rates too rapidly.

Bank of England Governor Mervyn King today admitted in an interview with the Financial Times that if house prices failed to slow as the Bank's monetary policy committee expected, interest rates would have to rise rapidly.

There was, however, good news for the beleaguered letting market as Savills reported increased tenant demand in London and the South East and said the market for commercial property investment in the UK 'remains strong'.