Reports predict three per cent rise in house prices

Two new reports on the UK property market have forecast a three per cent rise in house prices by the end of 2005.

12:05 17 December 2004

Two new reports on the UK property market have forecast a three per cent rise in house prices by the end of 2005.

The latest projections support the widely held view that there will be a small single-digit increase in house prices next year.

"We expect the first half of 2005 to be fairly weak as the impact of interest rate rises continues to feed into weak buyer affordability," the Royal Institution of Chartered Surveyors' (RICS), which helped publish the reports, said.

"However, with the economy continuing to display underlying strength, and growth in new jobs, a mild rebound in the housing market is likely in the latter half of 2005."

The National Association of Estate Agents (NAEA), which also contributed to the reports. agrees with this assessment.

"As expected, house price growth has begun to stabilise and we are currently seeing price corrections of around minus one per cent a month," Peter Bolton King, chief executive of the NAEA, commented.

"The economic circumstances of the present day are very different to the crash of the early nineties, when unemployment was high, rate rises were vicious and the economy was suffering from recession.

"If anything, activity is likely to pick up in early 2005 when buyers begin to return to the market and this will see prices stabilise once more.

"In short, once again the housing market is set to disappoint those anticipating the fireworks of a crash. Stabilisation is the most we can expect, with 2005 more likely to see a more sensible house price growth of around three per cent."

So far MyFinances has gathered housing predictions from eleven institutions, which range from a 15 per cent fall to a five per cent rise.

Overall the weighted average of the reports points to a rise over the year of 1.1 per cent.

This figure is based on reports on house price performance in 2005 form Abbey, Rics, NAEA, Barclays, Deutsche Bank, the Council of Mortgage Lenders, Nationwide, Halifax, Hometrack, Capital Economics, SmartNewHomes.com, and mortgage intermediary Charcol.