will rise by anything from 2% to 9% in 2004, depending
on which survey you read. Outlined below are some
views from the 'experts' with some analysis.
MOST commentators expect prices to carry on rising
in 2004, but at around 10% - slower than this year's
boom of around 15% but still above the average of
7% to 8% that the UK has enjoyed for the past two
The north of England is expected to lead the way,
while the slowest growth is forecast for London
around 6% according to lender Nationwide.
Nationwide said prices would increase by 9% in 2003
they rose by 15%. The building society predicts
rises of 9% nationally and 6% in London. Group economist
Alex Bannister said: 'The housing market will carry
considerable momentum into early 2004 and we expect
house price growth to be biased towards the first
part of the year. Later in the year, rising mortgage
rates and slow income growth will dampen confidence.'
Halifax, the UK's largest lender, said house prices
would rise 7% in 2003. In the end its own research
put the true figure at 15%. The bank believes next
year will see growth of 8%, supported by the 'three
pillars' of low interest rates, high employment and
Abbey expects house prices in the UK to rise by a
more modest 6% in 2004. Woolwich, owned by Barclays,
is expecting 5% growth. Last year, it was coy on giving
a precise figure. However, it did say interest rates
a key driver for house prices would
rise to 4.75%. The base rate* is currently 3.75%.
The bank now expects a rise to 4.25% in 2004.
Estate agents and surveyors
Estate agents - not known for talking down the market
- are among the most bearish of forecasters - the
National Association of Estate Agents expects a rise
of as little as 2% to 5%. Up market London-based agent
FPD Savills predicts 4%.
The Royal Institute of Chartered Surveyors (RICS)
says growth will be 6%. It predicted a rise of 'no
more than 11%' in 2003. 'The question on everyone's
lips is will the housing market crash next year. A
lot depends on the continuing strength of the overall
economy and low interest rates,' says Milan Khatri,
chief economist at RICS.
Several spread betting* firms allow clients to have
a flutter on whether house prices will rise or fall.
Bullish punters at City Index expect a 7% rise in
prices in England and Wales by July, although they
are betting on prices to nudge up just 0.5% in London.
Clients at IG Index expect no movement in London prices
between now and September.
Think tanks, economists and pundits
Capital Economics, an industry consultancy, leads
the doom-mongers. It has said the market will peak
in the middle of 2004 before falling back towards
the end of the year giving a 6% total rise over the
year. Ed Stansfield, property economist at Capital
Economics, says 2004 would be the start of a 20% decline
over three years. It believes, however, that a boom
will return in 2007.
The Centre for Economics and Business Research is
expecting a sharp slowdown in London growth from 10.7%
this year to 2.4% in 2004, 1.4% in 2005 and just 0.5%
The overriding view is that rising interest rates
will cool the property market although countrywide
price falls are unlikely. Nationwide points out that
if base rates rise from 3.75% to 4.75% in 2004, as
the City predicts, repayments will remain affordable.
Such a rise would see a typical homeowners
repayments rise from 27% to 31% of average take-home
pay. The figure soared to a painful 40% during the
late Eighties property boom.
|National Association of Estate Agents
|FPD Savills (estate agent)
|Royal Institute ofChartered Surveyors
|Capital Economics (consultancy)
|Centre for Economics and Business Research (think
|Home track (property data)
But the above views suggest many pundits believe
the old rules no longer apply a classic sign
of a bubble according to the property pessimists
and that a one-off switch from high to low interest
rates has given the market a unique boost in recent
years. They say low rates make repayments cheaper
and so therefore today's relatively higher house prices
can be sustained.
Wrigleworth's 'Elvis' comment makes it appear he's
putting his neck on the line. However, history suggests
property crashes take longer than a year to germinate.
The most infamous post-war decline that of
the late Eighties was drawn out. Prices fell
less than 9% in the first year from the market peak
of an average £62,700 in autumn 1989, according
to figures from Nationwide. But by the spring of 1993,
values had fallen a total of 21% to barely more than
And a look at Japan - another densely populated country
where property bulls argued high demand would continue
to push up prices shows that declines can
be long and painful. Prices there have been falling
The pundits, along with most homeowners, will be
keen not to see a repeat of either example in 2004