According to the Centre for Economics and Business Research (CEBR), the residential housing market is beginning to slow down.

By 2008, house price inflation will be down to less than 2% pa. Even at this modest level of growth, average house prices will reach £200,000 by end of 2008, which represents a doubling in the average price of a house in just six years.

In the short term, conditions for the housing market are less favourable than in recent years thanks to higher interest rates, while economic growth in 2007 and 2008 will be lower than in the recent past. However, a crash is unlikely as mortgages remain, for the average homeowner, affordable.

“We estimate that mortgage payments will remain less than 25% of disposable income. Consequently, the outcome will be a temporary slowdown, not a crash. However, in the longer term, interest rates will loosen and the economic cycle will begin to swing upwards, carrying the housing market with it”, said John Ward, managing economist at CEBR.