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Experts predict robust 2007 housing market

14th December 2006 | back to article listings BACK    print this article PRINT

London and the south-east will lead the UK's house price growth in 2007, a year when the property market will remain firm throughout the first six months before easing off in the latter half of the year, according to one of the country's largest mortgage lenders.

Momentum from spiraling property prices at the end of 2006 will cause growth of between five and eight per cent throughout 2007 predicts Nationwide.

However, later in the year, affordability pressures and poor performances from the northern and Welsh markets will cause prices to cool significantly.

Commenting on the research, Fionnuala Earley, Nationwide's group economist, said: "We can therefore expect to see a few months of double-digit annual house price inflation in the first half of the year.

However, increasingly poor affordability and likely cutbacks at the bank of Mum and Dad will cause the rate of house price growth to move back into single digits in the latter part of the year."

Nationwide expects prices in London to lead the way in the first quarter of next year with increases of ten per cent, mainly driven by a chronic deficit in the supply of accommodation in the capital.

The "ripple effect" will then come into play as Greater London as well as the outer south east will both see rises of nine per cent.

Conversely Wales and the north will be holding back the market's overall growth with just four and three per cent growth forecast respectively.

It is believed that this is due to a much better balance of supply and demand in these regions as the recent surge in immigration has been mostly concentrated in the south.

This year, the top two regions nationwide were undoubtedly Northern Ireland and Scotland but Nationwide does not expect their strong performances to continue into 2007.

The drop in growth rates, although marked, will not be too severe as homeowners in Scotland will see their assets rise by nine per cent, whereas those in Northern Ireland should exceed even London prices with house price inflation of 12 per cent.

Explaining these high growth rates Ms Earley said: "Such strong rates of growth are supported by the recent strength in both economies' labour markets and also reflect some element of catch-up as the earnings gap to the UK in both countries has narrowed over the last three years."

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