2008 will see prices rise

UK property prices will continue to rise in the new year, although the global credit crunch will ensure price rises are limited.

Spicerhaart has published its forecast for 2008, revealing that it believes inflation will reach just two per cent.

After 2008 however, the firm believes that price rises will come back as strong as ever.

"The credit crunch does seem set to continue into 2008. This will produce a subdued environment characterised by low average price growth of around two per cent, although some areas, such as regeneration hotspots, will prove more buoyant," said Steve Cox from Spicerhaart.

"As affordability constraints are eased and demand continues to outstrip supply, the long term future is set to be bright and we expect the housing market to return to its previously higher levels by 2009," he added.

Mr Cox also anticipates seeing the base rate of interest cut from 5.75 per cent to 5.25 per cent.

"The Bank of England will need to drop interest rates to ease affordability constraints and stimulate the property market. We therefore predict two reductions of 0.25 per cent, with the first relatively early in the New Year," he continued.