Ten per cent rise in house prices predicted

14 May 2003
House market analysts are today claiming that house prices could rise by ten per cent this year despite evidence that the market is slowing.

The Royal Institution of Chartered Surveyors (RICS) is predicting that low interest rates at the end of the conflict in Iraq will help inflate house prices by ten per cent over 2003.

While it argues that property continues to be a 'safe bet' for investors, the body states that the situation poses problems for first time buyers.

The RICS housing market survey predicts that much of the growth will be outside the South East of England and expects growth to slow to five per cent in 2004.

The body acknowledged that with growth slowing to just over four per cent - almost half that observed over the second half of 2002 - there had been growing evidence of a slowdown in the market during the first quarter of 2003.

Despite this evidence of a slowdown, the group argues that affordability remains stretched.

RICS reports that house prices have risen sharply in relation to national average earnings and suggests that that prices would have to fall by 30 per cent to return to historical norms due to the 'extraordinary heights' reached.

However, it does not expect this to happen in the near future.

It also highlighted the problems faced by first time buyers, particularly some public sector workers such as teachers and nurses, in starting on the property ladder.

RICS stated that inequalities of income and low levels of house building are compounding the problems faced by these groups.

RICS chief executive Louis Armstrong said: 'While the housing market is providing a healthy investment for some, with house prices expected to continue to rise in 2004, many first-time buyers, particularly public sector workers, are unable to save the substantial deposit required to bridge the ever widening financial gap.'