Nationwide revises house price forecast

09 August 2006
Nationwide has announced it has increased its house price forecast, one of the UK's most watched indicators, to five per cent to bring it into line with expected growth for 2006.

In December 2005, Nationwide estimated property prices would grow by between zero and three per cent in 2006 but since the economy has enjoyed better-than-predicted growth and the labour market has remained stable, the building society has revised its prediction.

Nationwide now says it expects 2006 property prices to grow by more than initial expectations, despite the recent announcement from the Bank of England that the base rate of interest has been raised by a quarter per cent.

"The resilience of the market so far this year in the face of deteriorating affordability suggests that there is still enough demand in the market to support prices," said Fionnuala Earley, Nationwide's group economist.

"However, we expect some softening towards the very end of the year, mainly due to affordability, but also reinforced by the surprise increase in interest rates, which can do nothing other than add to caution."

A robust revival of the London property market is set to continue to boost prices in the region, as well as have a knock-on effect on neighbouring areas in the Home Counties and beyond.

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