Housing Market Still Going Strong?

It seems that news on the UK housing market has been swinging from one extreme to the other. Last week we saw plenty of news, following the latest rise in interest rates, suggesting that house price growth was slowing and that a crash might be on the horizon.

Some analysts have suggested that UK home-owners have got themselves into too high a level of debt and that we may struggle to meet mortgage repayments, given higher interest rates and greater expenses in other areas (for example, rising household bills and petrol prices).

One argument that had been put forward by those promoting the idea that the UK housing market would continue to perform strongly was that demand would continue to out-perform supply, pushing house prices still higher. Gordon Brown's announcement that he planned to build more houses suggested a growth in supply, though some suggested that it would not be enough.

So...what is being said by analysts this week? The news agenda has been dominated by HBOS (Halifax - Bank Of Scotland) announcing that they have adjusted their estimated for house price inflation. They are now suggesting that the average cost of a UK home will have risen by some 6% by the end of 2007. This would mean a rise of some £12,000 on a property valued at £200,000 in January.

Such a rate of increase is still slower than previous years but does hide regional differences. London house price growth is still predicted to remain strong (at around 12% for Greater London), while Northern Ireland continues to see the fastest rate of growth.

HBOS also see a further interest rate rise in the near future (taking the base rate to 6%), although they appear to be predicting that this will be the peak for UK interest rates. Maybe too optimistic a view?