SmartNewHomes: House prices to rise by 2%

House prices are set to rise by only two per cent on average in 2006 despite a springtime surge, a new homes website is predicting.

SmartNewHomes.com says there will be a burst of activity in the first few months of next year, but by the end of 2006 prices will still only be marginally higher than they are at present.

"The UK housing market has left behind the years of rapid growth and we are now in a new phase for the market," said David Bexon, managing director of SmartNewHomes.com.

He maintained that the first 12 weeks of next year would be crucial to the annual pattern, with a lot hanging on the whether the Bank of England cuts interest rates from 4.5 per cent – something he does not think is likely.

There would be the usual increase in activity in the spring but this would not mean a return to the high levels of inflation seen in recent years.

"It is more likely that 2006 sees a continuation of steady and manageable single digit growth," he continued.

"By the end of 2006, house prices should have risen on average by around two per cent, with annual change slightly above that figure in Yorkshire and Humberside, the north-east and the West Midlands."

Demand for new homes has fallen during 2005, with the average price of a new home falling by 2.5 per cent since the beginning of the year.

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