Property Market Running Out Of Steam

House prices in Britain boomed this month, as a leading analyst claims that the UK property market is starting to run out of steam.

Research firm Hometrack predicts that the impact of the recent decision by the Bank of England's Monetary Policy Committee (MPC) to raise interest rates by a quarter point to 4.75 per cent has not yet been felt by the housing market.

The August housing market defied the traditional summer slump to record property price rises of 0.4 per cent over the month, with higher growth in London and areas where there is a lack of housing for sale. Average house price growth across Britain for the first eight months of 2006 is currently running at 3.9 per cent.

However, longer sales periods were seen in regions seeing slower growth in house prices and buyers accepted larger discounts on asking prices. Price rises were limited to less than a third (30 per cent) of the UK this month, down from 42 per cent in June this year.

Richard Donnell, Hometrack director of research, said: "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."

Hometrack claims that the present scale of growth in London is unsustainable over the medium term, as prices start to reach unaffordable levels. Regions away from the south of England have seen slower growth in recent months, as consumers respond to the boom in prices between 2000 and 2004.

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