House price rises 'to cool'

House price inflation has already slowed significantly

The rise in house prices is set to cool down this year, research suggests.

While some homeowners in the south east of England could see the value of their homes rise by double figure percentages, most property prices are unlikely to increase by more than 5%.

A year ago, house price inflation stood at 15%.

But the report, by the Centre for Economics and Business Research, says that slowing household expenditure and waning consumer confidence means this inflation has yet to bottom out.

"Our central forecast is that house prices will rise by little more than 5% this year, and the first half of the year could be even weaker than this," the report says.

But if oil prices stayed low and the Bank of England cut interest rates further, it could be enough to kick-start the property market in the second half of the year, it added.

"Although we are a long way from the conditions of early 2000, under this scenario it is not inconceivable that double-digit house price inflation could return at least to 'property hotspots' of the South East."

Figures released last week by the mortgage bank Halifax suggested that property prices were now rising at their slowest levels for five years.

But the bank maintained that the rate of property price inflation would not fall lower this year.