Property set for fair growth next year

House price inflation will slow next year, but average UK property prices will still grow by 6% during 2007, according to worldwide property company Knight Frank.

The research estimates growth for this year to wind up at 9% “The housing market, which staged an unexpectedly strong recovery in 2006, is expected to remain in robust health throughout 2007,” said Liam Bailey, head of Knight Frank residential research.

Prime property prices will continue to increase in 2007, with the London boom spreading across the whole South West.

Liam Bailey said: "The boom seen in central London in 2006, with prices rising by up to 25% in some micro-locations, will spread with equity-rich London and Home Counties buyers moving into prime regional markets and competing with local buyers."

Meanwhile Scotland and Northern Ireland will experience the tail end of the recent housing market boom, with prices expected to grow by 9% and 10% respectively.

The forecasts are based on the assumption that the base rate will rise to 5% this year and fall to 4.75% by the end of 2007.

Housing markets throughout Europe should also experience solid growth, the report said, despite concerns about increasing affordability issues, mounting household debt and the sustainability of current growth in a number of countries.

Liam Bailey said "With no obvious major international shocks visible at this point in time and a continuing broadly benign economic and interest rate environment likely, we see both buyer confidence and appetite remaining firm.”

However, while emerging markets would experience the strongest growth, some markets such as parts of southern Spain and Dubai required caution, Liam Bailey added.