Despite early indications of a buoyant start for the 2007 new homes market, the average price of a new home dipped slightly by 0.3% in January, as many new home buyers put plans on hold as they waited to see if another interest rate rise was in store.

The hold-back combined with the tail end of the seasonal slowdown took its toll on new home buyers, said SmartNewHomes.com in their February new homes index.

Detached homes regain former popularity

Detached homes regained some of their popularity in the first month of 2007, reporting one of the highest price growths from the previous month, while semi detached homes and town houses saw their average prices fall over the same period.

SmartNewHomes.com also records how much homebuyers indicate they are willing to pay for a new home. While the average price of a new home (stock price) fell by 0.3% over the last month, it was the average price buyers were willing to pay (demand price) that took the sharpest fall. This has not been experienced since the early months of 2006, and demonstrates the impact of rising buying costs over the last six months.

David Bexon, Managing Director of SmartNewHomes.com said: “We are currently witnessing the effect of the November interest rate rise, but the further impact of January’s increase is still to be felt. The decision to increase rates in January came as a shock to many, sending waves through the market as many potential buyers reconsidered the implications of taking on the additional debt that would arise as a result of stepping up the housing ladder.

“However, this month’s decision to maintain rates at 5.25% will have offered many buyers a degree of comfort and despite the marginal fall in the price of a new home recorded in January, overall prices are still up on those experienced at the same time last year, and over the last quarter.”

“First time buyers in particular should talk to house builders rather than give up hope of affording their first home. Most developers are in a position to help purchasers by assisting with deposits, paying stamp duty and even subsidising mortgage repayments, so the new homes market will come into its own as prices and costs continue to rise.”