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Ft: Uk House Prices Hit By Rate Rises

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Well, I looked and I looked, but I couldn't find any other links to this Nummy Nummy Bear Chow story.

From the Financial Times:

House prices have been falling in parts of the UK this summer as mortgage costs have become more expensive, according to research from the FT house price index.

They include Carmarthenshire, down 11.8 per cent; Hartlepool, down 6 per cent, Monmouthshire, down 4 per cent, and Powys, down 3.7 per cent in the three months to June.

These extreme localised falls may be aberrations affecting small, isolated markets. But most analysts agree that the five interest rate rises since last summer are starting to bite in some of the more remote and peripheral parts of the economy.

Even before the stock market turmoil of the past 10 days almost half the country’s housing markets were barely rising, with some even in decline. The current credit crisis, together with rising mortgage rates, is expected to slow the market further.

Although house prices in England and Wales grew at a healthy annualised rate of 5.9 per cent in the three months between March and June, it marked a slowdown on price inflation earlier this year.

“We’re going to move away from double-digit annual growth and shift down to single digits,” says Liam Bailey, head of research at Knight Frank. “Affordability is just very tight.”

The south-west was the only region where prices were still accelerating, with prices in Bournemouth, on the south coast, rising 16 per cent over the past three months. In five other regions of England and Wales where house price inflation remained high, price growth was nevertheless slowing.

In the Midlands and East Anglia the annualised growth rate was 1.1 per cent or below. And in Wales and the north, prices fell.

In the north-east’s Teesside, for example, house prices dropped by more than 2 per cent or more in Hartlepool, Redcar and Middlesbrough.

In Anglesey, the island off Wales, prices fell 9.8 per cent in the three months to June, after rising 280 per cent since January 2000. The fall has returned prices to levels of a year ago, wiping out last autumn’s gains.

“Interest rates have undoubtedly had an effect,” says Helen Roberts, a director of Sheridan Jones, an estate agent at Menai Bridge, Wales. “First-time buyers now can’t buy, and that interrupts the flow of the market.”

Despite this some salubrious London boroughs have continued to enjoy rampant house price inflation. Prices rose 12.8 per cent in the City of London, 7.6 per cent in Westminster and 6.6 per cent in Kingston upon Thames in just three months.

But given the the financial crisis that has gripped the City during the past month there are now questions over the sustainability of London’s boom.

“We feel in the industry that buyers are becoming more and more cautious,” says John Young of Humberts, the agents. Mr Young says that deals have been falling through, which is a rarity.

“I feel this is a sign of things to come,” he says. “With all of the uneasiness in the City, our normal risk-takers are sitting back a little more and waiting to see what happens as opposed to taking a gamble.”

The Royal Institution of Chartered Surveyors confirmed this sentiment in its July survey. Most of the underlying measures of housing market strength have turned since the spring.

The number of sales per surveyor were 10.3 per cent lower in July than a year ago and stocks of properties on estate agents’ books have started to rise. Meanwhile newly agreed sales fell at their fastest pace since November 2004 and new buyer inquiries were falling at their fastest pace since August 2004.

A slowdown in the market would be welcomed by the Bank of England, which has been concerned by the loosening in lending criteria of recent years.

Economists expect it to continue. Michael Saunders, of Citigroup, said the relevant indicators were all weaker. “At times like this, it is especially useful to focus on the lead guides, and these are clearly pointing down.”

Few analysts are willing to predict a sharp fall in prices – in autumn 2005 house price inflation rebounded, confounding predictions of a slump. But Mark Garner, a former commodities trader who retired in 1996 to become a full-time landlord, may be indicative of sentiment when he says he has not bought any properties since 2003 because yields were too low. “The housing market looks set to slow down and people who don’t need to sell will be okay. But people who have to sell may have to knock off 15 per cent to achieve a sale.”

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