Knight Frank predicts 3% increases in 2008

Property prices will increase by three per cent during 2008, according to forecasts issued today by estate agent Knight Frank.

This represents a slowing of the market compared to 2007, where property price increases are expected to reach six per cent.

"Our current view is that the UK market is likely to enter a weaker phase," said Knight Frank.

"The next 12 months will feel a lot like late 2004 and early 2005; a period when price growth slowed to low single digit levels, and more importantly a period when buyers looking to strike deals were met by over-ambitious vendors."

The organisation predicts sales volumes will fall to 12 per cent below the levels seen this year, but only five per cent of the long-term average.

"The prime markets are likely to perform better than the mainstream markets – but not by a wide margin," continued Knight Frank.

"Vendors of the very best properties will still be able to name their own price (almost), but for the rest of the market price growth will be noticeably lower than that seen in recent months."

The cost of renting should also increase.

Knight Frank predicts central London rents will increase by 14 per cent in total over 2007, but a slightly lower nine per cent in 2008.

Across the country these predictions fall to seven and six per cent for 2007 and 2008 respectively.