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Last Updated: Tuesday, 13 April, 2004, 12:47 GMT 13:47 UK
House prices stumble in February
Estate agent's exterior
Have recent rate rises begun to cool the market?
House prices fell 1% during February, according to the latest figures from the Office of the Deputy Prime Minister

The average price of a property dropped to 160,937 from 162,559 in January.

But the ODPM said the fall was the result of a seasonal slowdown - which is not reflected in its results as the figures are not seasonally adjusted.

It added that house prices were up by 9.8% in February on a year ago. Recent surveys by the Halifax and Nationwide have shown prices rising by 17-18%.

Market fears

Some members of the Bank of England's Monetary Policy Committee have warned that the current levels of house price inflation are unsustainable.

As a result the Bank has raised interest rates to 4%, and many analysts expect rates to rise further later this year.

The ODPM confirmed the recent trend of prices in Scotland, Wales, the North East and North West posting the biggest gains.

Across the UK, Scotland led the rises with annual inflation up to 26.2% from 23.3% in January, while in Wales the figure climbed to 21.7% from 19.3%.

But the figures for England were a different story, with annual price rises dipping to 8.7% in February.

Four English regions saw a drop in inflation - London, the East, South East and South West.

The South West experienced the largest fall with inflation dropping to 4.4% from 7.9%.

The East Midlands saw the biggest price inflation increase - rising from 10.5% to 12.3%.

Meanwhile, the figures for the North East (26.8%), North West (19.6%) and Yorkshire and Humber (18.7%) remain well above the UK average.

The government started producing its own monthly house price survey last year, using information from about 50 lenders.

But the figures do have some drawbacks, including the fact that they do not contain any information on cash purchases which make up around 25% of the market.

Boom 'will end in tears'

Another drawback is that it is not very timely, appearing two months in arrears, in comparison with the surveys from the main mortgage lenders.

The ODPM survey coincided with a report in the Financial Times that a top financial expert has forecast a collapse in the UK housing market.

London fund manager Tony Dye - who earned the nickname 'Dr Doom' for his bearish forecasts, including the technology market crash - was quoted as saying that the current housing boom will "all end in tears".

He added he expected prices in London to sink by 30% in real terms over the next five years, adding "a national decline of the same order would not surprise".

Mr Dye, who now leads his own hedge fund operation Dye Asset Management, later told the Press Association: "They (houses) are very expensive relative to people's incomes.

"People at the bottom of the ladder are almost precluded from buying.

"There are signs of a huge boom going on and basically these things always revert to more rational price levels. It's part of the eternal cycle."

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