House prices to rise 6%

House prices in the UK could rise six per cent this year, a new report finds.

While this is far less than the returns experienced in the last decade, a six per cent rise is faster than many analysts predicted at the start of the year.

House prices rose just 4.3 per cent in 2005, according to government data, after rising at an average of 12 per cent for the eight years before.

And most believed that house prices in 2006 would be weaker still, with the Council of Mortgage Lenders predicting a two per cent rise, HSBC predicting no more than three per cent growth, and Nationwide 0-3 per cent.

But the property market has been unexpectedly strong in the first few months of the year - forcing economists to revise their expectations.

"With interest rates expectations anchored at 4.5 per cent and with a booming financial sector, housing prices are expected to grow relatively robustly this year - and by more than most currently expect," said Jonathan Said, of the centre for economics and business research (cebr).

"In the first quarter of 2006, house prices added to the gains made at the end of 2005, with the demand for houses continuing to recover following the slowdown after the boom of the early 2000s."

He added that the early growth experienced is now expected to continue for some months to come, finishing the year six per cent higher.

The UK's southern regions are expected to do best, driven by higher wages and bonuses in sectors such as finance and business services.

But despite this, house prices are not set to return to their long-term trend of a growth of seven per cent a year until after the end of the decade, cebr predicted. XXX