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Mortgage holders see slower house price rise

Date: Thu, 25 Nov 04 Analysis

House prices will rise at their slowest pace for nine years in 2005, estate agents Savills has warned.

FPD Savills warns homeowners to expect prices to rise by just two per cent next year and by an average of 2.6 per cent over the next three, the in2perspective website reports.

The capital is expected to out-perform the rest of the country, with London homes increasing an average of four per cent a year between now and 2007.

Richard Donnell, head of residential research at FPD Savills, said: "The housing market is going to slow down in the short term but Armageddon is not around the corner.

"If you compare it to the last ten years, the returns from residential property are just not going to be as sexy."

Mr Donnell said the Bank of England had successfully softened the blow through its successive interest rate rises and feels that confidence may begin to return to the market in the New Year if consumers feel the cost of borrowing has peaked.

"Agents would probably prefer a fall of 20 per cent in house prices just so they could get selling again," he claimed, indicating the high street's desperation.

This news, though far from exciting for property investors and homeowners, is considerably brighter than recent predictions from Barclays and Deutsche Bank.

Barclays sees house prices declining 20 per cent in two years, while two leading analysts at Deutsche Bank predict a 15 per cent slump in 2005 alone.

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