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Last Updated: Monday, 23 January 2006, 10:47 GMT
Housing market 'to slow in 2006'
Couple looking at home advertisements
Most market experts predict modest price rises
The housing market will slow in 2006 but will not crash, according to an economic think tank.

The Centre for Economics and Business Research (CEBR) forecast house prices would rise by 4.4% in 2006, compared to 5.1% growth in 2005.

Last summer's interest rate cut will buoy the market in early 2006 but later in the year a slowing economy will hit house prices, the group predicted.

But a crash will not happen as housing demand exceeds supply, the CEBR said.

Forecasts

We expect activity in the housing market to remain buoyant through the first half of 2006
Jonathan Said, CEBR

The CEBR's forecast is roughly in line with those issued by banks and building societies.

Halifax, the UK's biggest mortgage lender, and Nationwide both said prices would rise by 3% during 2006.

But market sceptics, such as Capital Economics, have predicted a small fall in house prices in 2006, as a prelude to bigger drops in 2007 and 2008.

But the majority of forecasters agree with the CEBR that the first half of 2006 will probably see renewed vigour in the housing market but that this strength will start to ebb away later in the year.

"We expect activity in the housing market to remain buoyant through the first half of 2006 supported by a relatively benign macroeconomic environment," Jonathan Said, economist at the CEBR, explained.

"But the market may weaken in 2007. A slowdown in the US housing market will threaten world economic growth next year; this will have a knock-on effect here in the United Kingdom, and we expect this will take a further edge off our property market," Mr Said added.

Longer term, though, the group noted that house prices will be supported by demand for property continuing to outstrip supply.




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