Cebr: House prices to rise 4.4 per cent

The centre for economics and business research (cebr) has said it expects house prices to rise 4.4 per cent this year.

Cebr's quarterly housing forecast, published today, predicts that annual house price inflation will slow to 4.4 per cent this year, from 5.1 per cent in 2005.

Next year house price growth is set to be slower still, the think tank predicts, with prices rising 2.8 per cent in 2007.

But cebr adds that a recent resurgence means commentators should "stop writing obituaries for the housing market".

The report's authors think the housing market's strength at the end of 2005 will continue through the first half of this year. House price growth will then slow going in to 2007 as the economy decelerates and the impact of the 2005 interest rate cut wanes.

"We expect activity in the housing market to remain buoyant through the first half of 2006 supported by a relatively benign macroeconomic environment," commented Jonathan Said, economist at cebr and one of the report's authors.

"But the market may weaken in 2007. A slowdown in the US housing market will threaten world economic growth next year; this will have a knock-on effect here in the United Kingdom, and we expect this will take a further edge off our property market."

But this slowdown does not mean the death of the property market.

Mark Pragnell, another of the report's authors, explained: "For years now, too many commentators have been writing obituaries for the United Kingdom housing market - but it is quite clear there is still a lot of life left in residential property.

"Fundamentally, this country does not build enough new homes to keep pace with rising and changing demand - as family units get smaller, more people live alone, mobility increases, immigration grows and the attractiveness of different places vary.

"It is a simple matter of supply and demand. Only when - or, more likely, if - there's a step change in new housing will property cease to be an attractive asset."

Jonathan Said's views on the housing market, along with those of other top UK property experts, can be found at MyFinances' 2006 house price prediction page.

To find a cheap UK mortgage, go to www.myfinances.co.uk