Modest price rises expected for 2007

Posted: 29 May 2007 12:07:26 GMT

House prices will rise by only four per cent in 2007 as a result of interest rate rises and affordability pressures, one property company has predicted.

House prices will rise by only four per cent in 2007 as a result of interest rate rises and affordability pressures, one property company has predicted.

Property price growth is continuing to shrink this year, property company Hometrack has said, with average price increases slowing to just 0.6 per cent in May - down from 0.7 per cent in April.

"We expect the headline rate of growth to slow relatively quickly over the rest of the year towards four per cent as affordability pressures put a continued squeeze on purchasing power and more supply comes to the market," commented Richard Donnell, Hometrack director of research.

"The expected slowdown will be exacerbated by any further increases in interest rates above the current 5.5 per cent."

The demand for property is also expected to subside, with few new buyers predicted to enter the market in the coming months thanks to concerns over the affordability of the market.

Meanwhile, Hometrack's figures suggested that supply of property had actually increased slightly, with a six per cent increase in properties on the market in May.

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