Housing outlook subdued but not alarming

The UK housing market will experience a slowdown in prices that will result in almost non-existent growth in 2008, but a serious fall is unlikely, according to the latest forecasts.

Ernst & Young's Item Club economic report has envisaged a stalling of prices next year, but insists that fundamentals will ensure price growth returns in the future.

Nationwide, meanwhile, has revised its growth predictions for next year, and now believes that the market will remain stable, albeit without any actual increases in prices.

"Activity is likely to fall and prices may stall through 2008. But as interest rates come down and new supply remains restricted, the foundations will be laid for renewed real price growth in the long run," said Item Club chief economic adviser Peter Spencer.

"Item does not believe that the tighter lending conditions, caused by the worldwide squeeze on credit, will lead to a serious correction in house prices," noted the report, according to the Press Association.

Nationwide, meanwhile, had previously estimated that prices would rise by between three and four per cent next year.

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