House prices slowed slightly for the first time in six months, signaling the property market is cooling figures from the Royal Institution of Chartered Surveyors suggest.
The RICS findings point to property price inflation slowing in May, as the number of surveyors reporting price increases fell compared with the previous month.
The slowdown follows the two consecutive interest rate hikes and speculation over the size of any future rate increases, the survey says.
May also saw a drop in the number of people looking for a property to buy, with RICS reporting the first fall in the numbers since December last year.
That said, the shortage of houses coming onto the property market continues to put upward pressure on prices.
RICS believes prices will continue to increase, but notes that market optimism is at its lowest level since July 2003.
Ian Perry, RICS housing spokesman, says: "We would expect the number of house sales to be down slightly in May because of the two Bank Holidays falling during this month quickly followed by school half-term.
"Nevertheless, heated speculation over interest rates has cooled buyer activity and last week's rate rise confirms the upward trend is likely to dampen any further price surges."
The base rate is up a cumulative 1% since the rate cycle turned with last November's rise. This should slow price rises in the latter half of the year, with surveyor confidence in the price outlook taking a knock, Perry adds.
Mervyn King, governor of the Bank of England, last night issued a strong warning to home owners, indicating that house prices might fall.
Speaking to the CBI Scotland dinner in Glasgow, he said it was clear chances of falls in house prices were greater than previously as the ratio of house prices to earnings had gone "above what most people would regard as sustainable in the longer term".
"So anyone entering or moving within the housing market should consider carefully the possible future paths of both house prices and interest rates," he said.IFAonline
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