The Royal Institute of Chartered Surveyors (RICS) expects house prices to be broadly unchanged in 2008.

RICS does not believe that any drop in house prices will be extended in duration. The Bank of England has already countered any threat to the economy from the credit squeeze by cutting interest rates and RICS expects base rates to be lowered to 5% in the first half of 2008.

RICS believes repossessions will rise from 30,000 to 45,000, which amounts to 123 repossessions per day, as mortgage resets begin to bite. This is still well below the high water mark of the early 1990’s when repossessions rose to close to 80,000. If labour market conditions remain generally firm, an influx of supply from homeowners forced to sell by increases in their mortgage repayments seems unlikely.

RICS also thinks there is strong pent-up demand from first-time buyers who have been waiting for an opportunity to access the housing market. Should prices soften, RICS expects that many first time buyers will attempt to capitalise where they have been previously squeezed. In a climate with strong employment conditions, this should provide a boost to a flagging market.

Buy-to-let investment could slow into 2008 as the range of mortgage products diminishes in light of the credit crunch. But RICS’ research shows that there is little evidence of widespread sales of investment properties taking place.

Simon Rubinsohn, RICS’ chief economist, said: “2008 will prove a difficult year for the housing market, but with falls likely in the base rate, the housing market should be provided with a stable platform. The effect of the credit crunch will dissipate slowly meaning that those seeking to obtain finance in the first half of 2008 may struggle.

“However, the employment picture should remain firm throughout the year, helping to prevent significant numbers of repossessions and the subsequent influx of supply into the market. This should ensure that house price growth remains broadly flat over the course of the year.”