FEBRUARY 15TH, 2007

House price inflation eased to its slowest in seven months in January in a sign that three hikes in borrowing costs may be cooling the property market, a survey showed on Thursday.

The Royal Institution of Chartered Surveyors said its house price balance fell to 28.0 in the three months to January, the weakest reading since last June, from 36.6 in December.

The balance was still above its long-run average of 21, helped by a lack of supply and a booming market in London and southeast England, but RICS noted less interest from buyers and waning confidence about future prices and sales.

New buyer enquires in England and Wales fell for the first time in nearly two years as a 75 basis points rise in interest rates since last August made it more expensive for buyers to move up or get into the property market.

"The Bank of England's hawkish activity has deterred some buyers who have started to hesitate before taking the property ladder plunge," said RICS spokesman Jeremy Leaf.

Still, the figures may provide some relief to Bank of England policymakers who have been surprised by the resilience of the housing market to rising interest rates and subdued earnings growth.

BoE Governor Mervyn King said on Wednesday that any moderation of house price growth would be a "welcome development" in helping to bring inflation back to its target.

The RICS survey also showed sales rose in January at their fastest rate since May 2004, with a balance of 29.8 per surveyor in January from 28.6 in December.

And the sales to stock ratio, considered by some analysts to be a more reliable indicator of housing market demand, rose from 43.1 in December to 46.2 in January -- the highest since June 2004, when the housing market boom was at its peak.