Household debt is posing the greatest risk to house price growth, according to estate agent FPDSavills.
Richard Donnell, housing market analyst for FPDSavills, said: ‘In the absence of economic problems, rising levels of household debt pose the largest single threat to future house price growth. While debt may be cheap to service today, the real cost is much higher over the long term. Low interest rates are creating a money illusion.’
Donnell expressed his fears as FPDSavills estimated 2003 would see mainstream residential house prices rise by 12%. In other areas it predicted capital values in prime central London and the prime residential markets of the South East would rise by 4%, while prime markets across the rest of the UK would average a growth rate of 8%. Elsewhere, Halifax has predicted house price growth of 9% while Woolwich has cautiously estimated increases of around 4%.
However, there is little evidence of a slowdown in consumer spending and so a reduction in household debt.
Martin Ellis, chief economist for Halifax, added: ‘Consumer spending growth is set to slow from the rapid rate of increase recorded over the last few years, but continuing low levels of interest rates and unemployment will encourage households to spend at a slightly faster pace than their incomes rise, as consumer confidence remains buoyant.’