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EDITIONS
 Friday, 27 December, 2002, 04:39 GMT
Homeowners split on market's future
Estate Agent signs
The Woolwich believes the market will slow
Homeowners in the UK are split over the future of the housing market in the coming year, according to a survey by the Woolwich.

Over the past 12 months house prices have increased by about 30%, but it is not clear how long that growth can last.

Despite expert predictions that the market is set to slow, researchers said that about 53% of homeowners believed the housing boom would continue next year, down from 70% of those questioned in May.

It's crucial that home buyers look beyond short-term gains based on rapid house price inflation

Andy Gray
Woolwich
The survey found that 19% expected further double-digit growth in the market while nearly a third expected property prices to stay the same

And 15% thought prices would fall during the next 12 months while a pessimistic 4% of the 1,000 people polled for the Woolwich by NOP predicted prices would dive by more than 10%.

Open in new window : UK property market
The house price boom

The Woolwich, which predicts that house price inflation will gradually slow to around 4% during 2003, welcomed what it called a "healthy dose of realism" in the market.

The lender also expects interest rates to rise by three-quarters of a percentage point to 4.75%, increasing the cost of borrowing.

London confident

Head of mortgages, Andy Gray, said: "We believe that the house purchase market will slow gradually, whilst more existing homeowners will seek to re-mortgage to reduce their outgoings as weaker earnings growth, lower bonus payments, higher household taxes and interest rate rises work through.

"It's crucial that homebuyers look beyond short-term gains based on rapid house price inflation as this could intensify speculation regarding runaway house prices which could eventually lead to a dramatic correction."

The survey found people were least optimistic in the Midlands, where just 48% expected the cost of property to continue increasing.

However, people living in London and Wales were most hopeful that the boom would continue.

Overvalued

Confidence amongst London based homeowners flies in the face of recent surveys that indicate that house prices in the capital could fall in 2003.

The property website Rightmove reported that property prices in London fell by 2.6% in November - the biggest monthly fall of the year.

In addition, nationwide, the international investment banks Goldman Sachs and Commerzbank have said UK house prices are overvalued by 20%.

And the overheated housing market has prompted ratings agency Standard & Poor's to put the UK on its list of countries where banks face the prospect of rising bad loans.

  WATCH/LISTEN
  ON THIS STORY
  The BBC's Jenny Scott
"Predicting what will happen to house prices is notoriously difficult"
  Hugh Dunsmore-Hardy, Nat'l Assoc. of Estate Agents
"Post-christmas, we'll start to see the market pick-up again"

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