House prices continue to cool

Tuesday, 4 September 2007 12:00 AM

The UK housing market has responded to recent interest rate increases, with formerly buoyant growth now beginning to cool.

The annual house price increase is now 5.46 per cent during August, down from 6.59 per cent in February according to estate agents SpicerHaart.

"Following a prolonged period of extremely buoyant growth, house price inflation has begun to slow across the UK, as the succession of five interest rises since last August begins to take effect," explained Paul Smith, chief executive of haart estate agents.

Only 30 per cent of estate agents now reported significant growth (seven per cent or more) in house growth in August, down from 50 per cent six months ago.

However, slowing increases in property prices have not dulled market activity.

As many as 43 per cent of estate agents have seen an increase in the number of buyers coming into the market in the past three months, while the number of sellers has remained level.

However, despite the increase in buyers, the market is no longer frenetic and only reasonably priced properties are in demand, according to SpicerHaart.

Homebuyers are not willing to pay inflated prices and are instead choosing to bide their time.

"With buyers now increasingly price sensitive, sellers have lowered their expectations on achievable price," continued Mr Smith.

Some 60 per cent of estate agents have also seen a fall in the number of first time buyers making a purchase. This is blamed on increased interest rates forcing property finance out of reach for many.

However, the growing possibility that interest rates may have peaked and stabilising prices may reverse this trend and first time purchases are expected to pick up again in the next quarter.

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• uk property news