House sales plummet

by SEAN POULTER, Daily Mail

The number of houses sold in May dropped by a quarter from last year, fuelling fears of a painful end to the property boom.

In the first five months of the year 585,000 homes changed hands - 10 per cent fewer than for the same period in 2002, according to figures from the Office of National Statistics.

Steven Bell, chief economist at Deutsche Asset Management, said the property market was slowing even faster than expected.

He said: "We had hoped that the much healthier housing market outside of London would hold up the national market, but it looks as though it is heading for a bump."

Mr Bell believes the fall can be attributed to the Bank of England's decision not to cut interest rates below the current 40-year low of 3.75 per cent.

He added: "The rate-setting committee who voted against a cut may regret their decision."

Last week, shares in Britain's biggest chain of estate agents, Countrywide Assured, plummeted after it admitted house sales in March to April were around 33 per cent down on a year ago.

Sales in more expensive areas of London, such as Kensington, Chelsea and Notting Hill, are down by as much as 65 per cent.

But the outgoing Governor of the Bank of England yesterday denied that Britain was heading for a house price collapse.

Sir Edward George said that the boom of recent years was 'not sustainable', but that the market was seeing a 'moderation' in house price increases rather than a collapse.

He added: "There has been a lot of rather strong language about house prices being set to crash.

"In fact what is happening now, I think, is that although you are seeing house prices actually fall in some areas - like the very high end of the London market - the picture for the country as a whole is moderation in the rate of increase, and that is what we need to see, because it was quite clear that the rate of increase was not sustainable forever."

He said the economic outlook was improving in Britain and around the world, and the country should be able to look forward to "better balanced growth, relatively steady growth".

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