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Boom and bust cycle unlikely as housing market steadies

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  • 01/02/2001
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By Kirstie Redford The housing market is to remain stable for the next three years, according to the...

By Kirstie Redford

The housing market is to remain stable for the next three years, according to the latest forecast by the Council of Mortgage Lenders (CML), with a predicted 6% rise this year, falling to a constant 5% in 2002 and 2003.

The increase in house prices last year were, according to the CML, essentially London driven, and as demand fell so did the rate of house price growth, leaving a more settled outlook over the next few years.

The CML also believes that the number of house sales will remain stable at just over a million a year.

Commenting on the forecast, Michael Coogan, director general of the CML, said: “The stable outlook for the economy and interest rates is helping to remove the old boom and bust cycle from the housing market. The prospects for stability in the economy, interest rates and the housing market are helping home buyers to look to the future with more certainty than in the past.

“Consumers are benefiting not only from persistent low interest rates but from the competitiveness in the mortgage market. This combination continues to make home ownership very affordable.”

Nationwide also reported a fixed outlook over 2001, with a year-end forecast of 7%. The lender announced a 1.2% rise in house prices for December 2000, with annual house price inflation ending the year at 9.3%.

Commenting on the figures, David Parry, divisional director at Nationwide, said: “The year ended with plenty of festive cheer. In 2000 we have had much talk of booms and then busts. In reality, the market paused for breath mid-year and is now moving ahead at a steady sustainable pace. House prices rose by 1.2% in December which means the average price of a property in the UK is now £82,188. With annual house price inflation finishing the year at 9.3%, this has to be good news for homeowners.”

But rival lender Halifax reported a fall in house prices over December, with the annual rate of house price inflation declining from 7.1% in November to 3.1%. Commenting on the year ahead, Halifax said that a sound economic background and the prospect of lower interest rates will underpin the market and levels of affordability are set to support housing demand.

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