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Last Updated: Thursday, 21 December 2006, 22:28 GMT
Where are house prices heading in 2007?

A sold sign
Most forecasters suggest house price growth above inflation

In 2006 growth in the UK housing market exceeded many analysts expectations.

Instead of moving ahead at a rather moribund 2% or 3%, average growth across the country reached almost 10%.

In some parts - London and Northern Ireland for example - the market boomed once again.

But what will happen to house prices in 2007?

Will it be a case of steady as she goes or will property values take a tumble?

Five predictions for 2007 are summarised below.

Halifax, the UK's biggest mortgage lender:

Will prices rise or fall during the next twelve months? Rise.

By how much? 4%.

2007 overview: House price inflation in 2007 will be at its lowest level since 1995, the bank says. "Sound" economic fundamentals such as continued growth and high employment levels will prevent a crash.

Did it get it right in 2006? No, it predicted a rise in prices of 3%. The market proved much more robust than predicted due to high levels of employment and continued economic growth. The bank also said that the north/south price divide would narrow, it did not. In fact, as it turned out, London led the way.

Regional winners and losers? All regions except London are set for lower house price growth in 2007 than occurred in 2006. Northern Ireland will record the highest rise overall but instead of seeing prices rise 34% in the year to November, prices are set to increase by 15%.

Nationwide, UK's biggest building society:

Will prices rise or fall during the next twelve months? Rise.

By how much? By between 5% and 8%.

2007 overview: A shortage of supply will support prices in the early part of the year. However, as 2007 progresses, deepening affordability problems and a withdrawal of support from parents of would-be first-time buyers will lead to the market cooling.

Did it get it right in 2006? No, like all other forecasters, Nationwide underestimated the strength of house price growth. The society said that prices would rise by 3% during the year, less than a third of the actually increase.

Regional winners and losers? Northern Ireland and Scotland should see much slower house price growth, the society says. London and the south east will drive the market higher, particularly in the early months of the year.

Council of Mortgage Lenders (CML)

Will prices rise or fall? Rise, and not just in 2007 but in 2008 as well.

By how much? The CML says prices will rise 7% in 2007 and 5% in 2008.

2007 overview: House price inflation to continue to rise above average prices and likely wage inflation leading to more would-be first-time buyers priced out of the market. Loans for remortgaging to fall as consumers tighten their belts. Number of property sales to fall slightly over the next two years from already high levels.

Regional winners and losers? No prediction issued on how the market in each region will pan-out.

Capital Economics, independent economic research company

Will prices rise or fall? Rise.

By how much? By 3.5%.

2007 overview: The group says that the "housing market may finally be about to slow". Rising interest rates will be the catalyst for the slowdown, it adds, warning that because so many homeowners are stretched financially even a relatively small rise in UK interest rates could send many people's finances spinning out of control.

What is its forecasting track record? Capital Economics have been amongst the most bearish of market commentators. In the past they have predicted substantial falls in property prices. To date they have been about as wide off the mark as is possible. They still believe that property is overvalued and will eventually fall in price.

Regional winners and losers? London will do well, due in part to high bonuses paid to workers in the City. The north-west of England and east Midlands will see the slowest housing markets.

Royal Institution of Chartered Surveyors (RICS), an industry body.

Will prices rise or fall over the next twelve months? Rise.

By how much? By 7%. It expects steady growth during 2007.

2007 overview: RICS said it expected prices to rise on the back of an increasing number of sales. But the group warned that repossessions will increase in 2007 as over-stretched homebuyers struggle to cope with the recent Bank of England (BoE) rate rises.

What is its forecasting track record?It predicted that the number of house sales would rise during 2006. At the end of 2005 it forecast that house prices would rise by 4% in 2006, going on to raise that figure to 7% in August.

Regional winners? London, again, south-east England, Scotland and Northern Ireland are all set to outperform the national average. RICS suggests that these areas will beat the national average for the next five years.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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