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House prices could ‘soar 15%’ next year

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21/12/2006

House prices may well be 15% higher at the end of 2007 than they are now, according to an economic research group.

Lombard Street Research said that recent interest rate rises would not dampen the UK housing market, as property is such a powerful saving and investment method for many consumers across the country.

Diana Choyleva, Lombard Street forecaster, said: “House prices are not overvalued if you look at affordability, and with interest rates at just 5%. Market momentum will be sustained in the near term and a weaker global economy should stop the Bank of England raising interest rates by more than a quarter of a percentage point in the spring.”

Choyleva noted that these are encouraging pointers to a good year ahead for one of the most popular methods of saving and investment in the country. “On the basis of these factors we are forecasting house price rises of between 10% and 15%,” she said.

However, there could be a downside if double-digit house price inflation takes off in 2007, as Choyleva reckons a bubble could develop in 2008. “This could burst, as they have done so in the past,” she said.

Most mortgage providers and economics groups have predicted house price growth at just above the rate of inflation for 2007.

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