UK house price inflation at 2-year high

British house prices rose at their fastest annual pace in more than two years in October, a survey showed today, but the gain was driven mainly by continued strength in London's property market.

Property consultant Hometrack said house prices rose 4.9 per cent this month compared with a year earlier, the fastest annual rate of growth since August 2004.

Prices were 0.4 per cent higher than in September, although the monthly figures are not adjusted for seasonal factors.

Still, the data are further evidence that August's rise in interest rates to 4.75 per cent has not dented overall housing market activity.

Hometrack said house price inflation continued to be driven by strong price growth in London and southeast England, but that masked weaker increases in the rest of the country.

House prices in northern England, for example, have risen just 0.4 per cent in the last 10 months, compared with a 9.9 per cent rise in London, and 4.4 per cent increase in the southeast, the survey showed.

"The reality for many home owners is that house price growth across large swathes of the country has been extremely modest over the last 12 months," said Richard Donnell, director of research at Hometrack.

However, there are signs London's property market may also be running out of steam.

Mr Donnell said London prices slowed for the fourth month in a row in October and the time taken to sell properties had steadied over the last three months at nearly four weeks.

Moreover, while a lack of properties on the market has helped to buoy London house prices, Mr Donnell said an increase in the number of homes up for sale this month -- the first rise in five months -- suggested supply was catching up with demand.

"A flood of potentially over-priced properties coming to the market would certainly put an end to the recent level of price rises," he said. "There are clear signs that the momentum in the London market is starting to slow and this is likely to continue in the run-up to the New Year."

- REUTERS