UK home prices rise in April despite rate hikes

UK home prices rise in April despite rate hikes

JohnFraher

Friday, May 18, 2007

House prices in Britain rose in April as higher interest rates failed to stem gains in London and the southeast of England, the Royal Institution of Chartered Surveyors said.
The number of real estate agents and land surveyors reporting higher home values in England and Wales outnumbered those showing declines by 28.9 percentage points in the three months through April, the London- based organization said. That's the most since December. In London, the balance was 86 percent.

The Bank of England raised borrowing costs for the fourth time since August last week after inflation accelerated to a record in March and a property boom showed few signs of slowing. House prices have jumped as bankers and wealthy foreigners pour money into real estate and a shortage of homes limits supply.

"Last week's interest rate hike may not be the last as the housing market has not slowed as quickly as expected, given the initial round of rate rises," said Ian Perry, a spokesman for RICS. "With prices buoyant and conditions still tight, another rate rise later in the summer looks likely."

The Bank of England raised its benchmark by a quarter point May 10 to 5.5 percent and futures trading suggests investors expect a further move in the third quarter.

Along with London, prices were also driven higher by Northern Ireland and Scotland, RICS said, but there were signs the market may cool in coming months. Surveyors' confidence in the price outlook fell to the lowest since September 2005 and inquiries by new buyers fell for a fifth month.

The Bank of England said May 2 mortgage approvals fell to 113,000 in March, the lowest in 11 months.

A lack of new properties and a boom in London's financial services industry are driving up home values. UK house prices rose at the second-fastest pace since 2005 last month, rising 10.9 percent, HBOS said. BLOOMBERG