Estate agents rule out house price crash

Estate agents rule out house price crash

The housing market will face a "controlled slowdown" rather than crash in 2004, according to the National Association of Estate Agents.

Issuing its forecasts for the year ahead, the trade body criticised economists who this time last year predicted a housing market crash. A spokesman said a modest rise in prices of 2%-5% nationally was expected for 2004.

Earlier this week the Royal Institution of Chartered Surveyors said it was predicting rises of about 6% next year. Both the RICS and NAEA forecasts are significantly lower than those of leading mortgage lenders, including Halifax and Nationwide.

Halifax, the country's biggest lender, said it anticipated average price rises nationally of 8% next year, while Nationwide said growth of about 9% was likely.

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The forecasts of all big lenders and those of the RICS and NAEA agree that house price growth will be greatest in the north of England, with prices in the south remaining flat. They also anticipate that first-time buyers will continue to struggle to get on the ladder.

The NAEA said it expected interest rates to peak at 4.75% next year but that this was "unlikely" to have a dampening effect on the market.

Peter Bolton King, chief executive of the organisation, said the housing market was significantly more stable than pundits had predicted at the beginning of 2003. "The disaster some commentators were trumpeting for 2003 never happened. House prices in most areas of the country continued to rise," he said.

"We anticipate that prices will end the year up by about 10%, although this figure is far too optimistic for London, where house prices flattened."

Mr Bolton King added that, while there was a slowdown in the number of transactions earlier this year during the Iraq war, demand rose swiftly after the main conflict ended. He said the renewed buyer confidence which followed showed no sign of abating going into the new year.

Some housing forecasts for 2004 have come with warnings about homeowners over-stretching themselves by taking out large mortgages.

Bradford & Bingley, which released its forecasts for the next 12 months this week, said the worries were unfounded. It has concluded that mortgage rates are likely to remain low in 2004, keeping down the overall cost of owning a home.

But in a report out today, Halifax warns that even with low interest rates making mortgages cheaper, owning a property is increasingly expensive. According to the Halifax study, the cost of owning an average property rose by 7.2% in 2001-02 - nearly three times the rate of inflation.

The study found that homeowners' costs rose to an average of £5,604 in the 12 months to December 2002. It concluded that decreasing affordability of home ownership was due largely, however, to the fact that average earnings have failed to keep pace with the cost of maintaining a property.

Rises in council tax and utility bills scheduled for the new year were likely to exacerbate the problem, a spokesman said. "Despite the lowest interest rates for 50 years, the cost of running a home is rising at a very significant rate at well above the rate of inflation.

"The government needs to be mindful that there is a limit to the amount of tax homeowners can bear before fiscal fatigue kicks in."

Guardian Unlimited © Guardian Newspapers Limited 2003