Abbey predicts six per cent house price growth in 2004

19 December 2003
House prices in the UK will rise by around six per cent during 2004, according to Abbey.

The bank predicts that the rise would increase the price of average property by £8,000 to £133,000.

Barry Naisbitt, Abbey's chief economist, says: "House price growth in the UK has slowed over the past year and Abbey expects that it will continue to moderate over the coming year. House prices are currently around 11 per cent higher than a year earlier. This is a marked reduction in the pace of growth from the annual increase of 25 per cent seen in late 2002. We expect that prices will rise by about six per cent in 2004, once again ahead of the rate of general price inflation."

Abbey predicts that the UK economy will continue to grow steadily in 2004 by 2.5 to three per cent, maintaining high employment levels and providing a background for steady consumer spending growth.

The company also expects modest interest rate increases during 2004, ending the year at around 4.5 per cent.

The Abbey report backs recent surveys showing the UK housing market continues to be buoyant, despite a recent rise in interest rates and concern about rising levels of consumer debt.

"Against a background of continued economic growth and the increase in base rates already seen in November, the housing market is expected to remain steady in 2004. Affordability, in terms of the share of income required to service mortgage borrowing, remains positive for the housing market. Home movers are currently seeing initial mortgage payments at just below 11 per cent compared with 15 per cent five years ago," Mr Naisbitt added.