The Royal Institution of Chartered Surveyors (RICS) expects UK house prices to grow by 7% and affordability and accessibility for first time buyers to continue to worsen in 2007.
Predicting a small slowdown from this year's 8% growth rate, RICS expects activity to remain high with demand outstripping supply.
Following the Bank of England's two recent interest rate increases, coupled with another possible interest rate rise to 5.25% in the coming months, RICS believes this will help cool the market in the new year, although conditions will remain healthy.
Repossessions will rise as affordability conditions worsen but the overall strength of housing demand will limit the negative impact on prices. This contrasts with experiences in the early 1990s where prices dropped following sharp interest rate rises.
RICS believes that some commentators have overplayed the role of buyer expectations in house price gains. The market is not in danger of correction as factors such the economy and the strength of the job market have a far stronger short-term impact on the market, with buyer expectations taking a long-term view.
A slowdown in the housing market will not aid affordability or accessibility for first-time buyers as prices continue to outstrip incomes.
RICS expects London, the South East, Scotland and Northern Ireland to outperform national average house price increases in both 2007 and in the next five years.
