London boom likely to puff out

House prices rose by 0.4pc during August according to Hometrack.co.uk.

This brings house price growth over the first eight months of 2006 to 3.9pc.

The mini-boom in the South is again evident this month. Average residential values in London grew by 0.9% over August with above average growth in the South West (0.5%) and the South East (0.4%).

In contrast, house prices were static in two regions and up by just 0.1% in three others. In fact, Hometrack found that price rises were limited to 30% of the country over August, compared to price rises across 42% of the market in June 2006.

Hometrack also reported longer sales periods in the lower growth regions as well as buyers having to accept slightly larger than average discounts on asking prices.

Key Points
- Average price of a home: £165,500
- the London-inspired mini boom of the last eight months is likely to run out of steam over the autumn

Generally it’s London and the South West determining national averages for house prices. As long as this growth continues, the national house price growth figure will remain high. However, the recent rise in interest rates has yet to bite, but Hometrack did note that buyers are starting to test pricing levels with agents reporting a slight decline in the proportion of the asking price that is being achieved.Richard Donnell, Director of Research at Hometrack said: “The divergence in house price growth is largely a result of affordability and supply-side factors. A lack of housing for sale is certainly playing a major role in sustaining the scale of growth in London with agent?s property listings falling over the last quarter. In contrast, the supply of housing for sale has continued to see above average growth in the regions where price rises are low.

The recent rise in interest rates, and talk of further rate rises, is set to have a clear impact on market sentiment and levels of market activity. The result will be less upward pressure on house prices over the autumn and slower house price growth.