Savills: Property price growth of 3% in 2008

Tuesday, 06, Nov 2007 09:43

House price growth is predicted to continue next, albeit at a slower rate than during 2007.

The top-end estate agent Savills has predicted growth of three per cent in average UK property prices during 2008.

The largest growth is expected to be highest in three key areas.

The estate agent forecasts the south-east and London will see growth of 4.5 and five per cent respectively.

In turn Scotland can expect to benefit from historically low house price growth and a reversal of outward migration trends to see growth of four per cent.

Slower growth, of just 0.5 per cent, is expected in Yorkshire & the Humber, the north-west and the north-east.

"House price growth has been slowing since the beginning of the year in the mainstream markets as interest rate increases have heightened affordability issues," according to Lucian Cook, director of Savills research.

"To date the effect has been most notable in the Midlands and the north, with markets in London and the south proving to be more robust.

"We expect this differentiation to continue during 2008 through a period of slower economic growth."

The credit crunch is likely to have a continued impact on the market, as restrictive lending criteria reduce access to mortgage finance - reducing demand.

This is likely to impact on the buy-to-let and first-time buyer markets.

However, there will be no slump.

"Although repossession statistics show steady increases since 2004, they remain low in the context of total transaction numbers and currently only constitute about two per cent of stock turnover," continued Mr Cook.

"This level is insufficient to alter the balance of supply and demand.

"Repossessions may well rise but this is more likely to be a symptom of the slow down rather than the possible cause of something more alarming."

Prime markets will also slow according to Savills.

While prime central London and prime country house markets have seen growth of 27 and 11 per cent respectively this year, this is likely to fall to five and 4.5 per cent in 2008.

While these markets are less susceptible to changes in interest rates the fall-out from the credit crunch, and the according reduction of city bonuses, will take its toll.