House prices 'will remain strong'

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At-a-glance

The UK's biggest building society has said house prices look set to increase by 9% next year.

Nationwide said it expected most of the growth to come in the first half of 2004, before rising interest rates and weaker income growth dampen confidence.

Its figure is more than the 8% the Halifax predicted earlier this week, but lower than the 15% prices are expected to have risen by in 2003.

The figure is also well down on the large rise of 25% in 2002.

Supply shortages

Earlier this week a survey from the Royal Institution of Chartered Surveyors (RICS) showed house prices rose sharply in November, with the key London market buoyant.

Overall, 17% more surveyors reported price rises than price falls partly as a result of supply shortages.

And the majority of surveyors said they were optimistic that house prices would continue to rise well into 2004.

The Bank of England's rate-setting committee increased interest rates by 0.25% to 3.75% in November.

Strong demand for housing was one of the reasons given by the bank's Monetary Policy Committee for the rate rise.

'Realistic expectations'

Alex Bannister, Nationwide's group economist, said: "The housing market will carry considerable momentum into early 2004 and we expect house price growth to be biased towards towards the first part of the year.

"Later in the year rising mortgage rates and slow income growth will dampen confidence.

"House price expectations are also likely to become more realistic, especially in the North where prices are currently rising at an unsustainable pace."

He said price growth is expected to be strongest in northern regions of England, and Northern Ireland.