British house prices rose at their quickest pace since 2004 in the three months to July, climbing in all regions for the first time in more than two years, a closely-watched survey showed today.
The Royal Institute of Chartered Surveyors said its house price balance rose to +31 from +28 in the three months to June -- its strongest reading since May 2004 when house price inflation was in double figures and the price balance hit +41.
RICS said forecasts for short-term house prices were also at elevated levels, despite this month's surprise Bank of England interest rate rise, but said further hikes could cool prices in the future.
"The increase in interest rates will do little to dampen the market as a strong economic outlook and improving employment prospects will hold up the confidence of households," said RICS spokesman Jeremy Leaf.
"Further interest rate rises are to be expected later this year and will slow activity in early 2007 from current buoyant trading levels."
But RICS said a robust economy and jobs market, coupled with solid demand for housing and falling property supply, should save the housing market from a hard landing.
"With sales activity still on the rise, the amount of available property for sale dropped in July to the lowest levels since September 2004, and is 10 per cent below the level of a year earlier," RICS said in its report.
The sales-to-stock ratio, regarded by many economists as a better guide to the health of the housing market than prices, rose to 37.4 per cent in July from an upwardly revised 36.4 per cent in June.
"The ratio has now risen above the long run average for the survey and has generally risen over the last 15 months, indicating a tightening of the market," RICS said.
London and the South East contributed much to the surge in July's prices, with the capital posting its strongest rise in more than six years, boosted by a strong financial services sector.
Enquiries from new buyers rose faster than in June, up for a 14th consecutive month, but evidence is mounting that first-time buyers are being priced out of the market, especially where homes are most costly.
"Rising house prices are still preventing first-time buyers from entering the market, creating a property glass ceiling for many in London and the South East," said RICS' Leaf.
- REUTERS
UK house prices rising at rapid pace
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