Savills residential research has forecasted 3% growth in average UK house prices in 2008, as the slowdown in the housing market continues over the first half of next year before picking up again as interest rate pressures ease.

The impact of the credit squeeze is likely to contribute to the slowdown in 2008 because tightened lending criteria will reduce accessibility to mortgage finance.

Lucian Cook, director of Savills research, said: “House price growth has been slowing since the beginning of the year in the mainstream markets as interest rate increases have heightened affordability issues. To date, the effect has been most notable in the Midlands and the North, with markets in London and the South proving to be more robust.”


Savills average forecast for the country shows some substantial variations; the mainstream London and South East markets have forecast growth levels of 5% and 4.5% respectively, whilst for the North East, the North West and Yorkshire and Humberside, Savills is predicting just 0.5%.


Scotland is still benefiting from relatively low historic house price growth and a recent reversal of the long term trend of out-migration. Prices are expected to rise at above the UK average, but the Scottish market will not be immune to those pressures affecting the rest of the UK, warns Cook.