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CEBR: 'Stop writing obituaries for housing market'

Tuesday, 24 January 2006 12:00 AM

A leading economics consultancy is urging commentators to stop writing obituaries for the housing market.

The Centre for Economics and Business Research believes the housing market's strong end to 2005 will continue in the first half of 2006.

It believes house prices will rise 4.4 per cent in 2006, compared to 5.1 per cent in 2005, with inflation slowing down in the second half of the year as the impact of August 2005's rate cut dies out.

House price inflation could slow to 2.8 per cent in 2007 as a result of the knock-on effects of a slowdown in the US economy, but this is far from house price crash that some commentators have predicted.

"We expect activity in the housing market to remain buoyant through the first half of 2006 supported by a relatively benign macroeconomic environment," said CEBR economist Jonathan Said.

"But the market may weaken in 2007. A slowdown in the US housing market will threaten world economic growth next year; this will have a knock-on effect here in the United Kingdom, and we expect this will take a further edge off our property market."

The CEBR's Quarterly Housing Forecasts predicts that UK annual house price inflation will climb to 3.9 per cent in 2008 from its low in 2007, and then fall back to 3.5 per cent and 3.2 per cent in 2009 and 2010.

Mark Pragnell, one of the report's authors, added: "For years now, too many commentators have been writing obituaries for the United Kingdom housing market - but it is quite clear there is still a lot of life left in residential property.

"Fundamentally, this country does not build enough new homes to keep pace with rising and changing demand - as family units get smaller, more people live alone, mobility increases, immigration grows and the attractiveness of different places vary.

"It is a simple matter of supply and demand. Only when - or, more likely, if - there's a step changes in new housing will property cease to be an attractive asset."

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