London house prices rose at the slowest pace in five months in June as the cost of a home fell in more than half of the UK capital’s areas

London house prices rose at the slowest pace in five months in June as the cost of a home fell in more than half of the UK capital’s areas, Rightmove plc said.

Asking prices increased 0.7 per cent from a month earlier to £387,898 (S$1.18 million), half the pace of May, as values fell in 17 of the city’s 32 districts, the UK’s biggest real-estate website said in a statement yesterday.

Gains across the UK outpaced London for the first time since January, with a 0.8 per cent increase in June.

‘London is falling behind the rest of the country,’ said Miles Shipside, Rightmove’s commercial director. ‘We can expect a drop in house prices over the next few months.’

A nationwide property boom, led by demand from rich foreigners and bankers in London, may be peaking as interest rates at a six-year high deter other homebuyers with record debts. A further interest-rate increase, signalled by Bank of England governor Mervyn King last week, may put the market under added pressure to cool.

Southwark, an area south of London’s financial district, had the largest price drop on the month, falling 2.8 per cent. The next-biggest decline was 2.4 per cent in Hounslow, close to Heathrow Airport.

The capital’s priciest areas still increased on the month, helping lead gains across the city. Kensington and Chelsea, the district populated by bankers, footballers and celebrities such as Elizabeth Hurley, had gains of 3.4 per cent on the month and 73 per cent from a year earlier, to an average £1.4 million, yesterday’s report showed.

London asking prices rose an annual 23.1 per cent this month, the weakest pace since March, the survey showed. The average time for a home to stay on the market rose to 69 days from 65 days.

Across the UK, asking prices rose an annual 13.2 per cent in June to an average £239,317. The cost of a home climbed on the month in seven out of 10 regions, led by a 5.8 per cent gain in the West Midlands. Rightmove measured about 200,000 properties put on sale across the country between May 13 and June 9.

Other reports suggest Britain’s property market may be slowing after four interest-rate increases to the current level of 5.5 percent added to the cost of servicing consumer debts of £1.3 trillion. House prices rose at the slowest pace in a year in May, the Royal Institution of Chartered Surveyors said on June 14.

Gains in values have exacerbated the divide between homeowners and those not on the property ladder. More than four million people, or about a quarter of those who don’t own a home, expect never to be able to do so, according to a survey of 2,722 people for the National Housing and Planning Advice Unit in England finished on May 14.

The richest homeowners in London can look forward to a 20 per cent increase in prices this year, real-estate agents Knight Frank said on June 14.

‘There will continue to be a lot of demand for housing in London driven by Russians and Chinese and Indians and so on at the top end,’ said Jonathan Said, an economist at the Centre for Economics and Business Research in London, in an interview. ‘That should keep house prices quite robust.’

Source: The Business Times, 19 June 2007