Housing market 'on the wane'

'Baghdad bounce' accounted for tiny confidence boost

House price growth is set to continue slowing for the rest of 2003 as consumer confidence dips, according to a survey by the Woolwich bank.

Despite a slight uplift in confidence during April following the end of war in Iraq, the Woolwich said optimism amongst homeowners still had a long way to go to reach the heights of last year.

The effect of what the bank refers to as the 'Baghdad bounce' may be short lived, it said.

Fresh concerns over the UK's slowing economy and higher taxes could prompt consumers to rein in house purchases during the summer.

Overall, 51% of people surveyed said that they felt house prices would rise during the next year, up from 50% in March.

Market softens

The number of people feeling confident about house price prospects was well down from a high of 68% reached in May last year.

Woolwich said that despite April's slight rise, it expected people's confidence to continue to soften throughout the year, moderating house price inflation.

Andy Gray, head of mortgages at The Woolwich, said: "We believe that house price inflation will slow steadily as weaker earnings growth, lower bonus payments, and higher household taxes means that people, particularly in the South East, simply cannot afford to chase house prices higher."

In addition, Mr Gray had a stark warning for homeowners who believe the good times of last year - when prices rose by nearly 30% across the UK - can go on forever.

"It is becoming increasingly important that people realise they cannot rely on the fact that their property's value is going to continue to increase at the double digit rates we have seen recently," he said.

But despite reporting falls in prices in London and the south east during the last two months, the Royal Institution of Chartered Surveyors (RICS) recently predicted that a recovery was in the pipeline for later in the year.