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Mortgage holders to see property values increase

Date: 31 Jan 05

Mortgage payers will see the value of their properties increased by a healthy four per cent this year.

Rob Thomas, formerly of City investment bank UBS and the Bank of England, believes that this will be followed in 2006 with house price inflation of six per cent, the Guardian reports.

Mr Thomas explained that fears that buy-to-let investors will desert the housing market, which would drive down prices, are misplaced because stock market returns remain relatively weak compared to property investments.

He commented: "Concerns about buy-to-let investors exiting the market and the disappearance of first time buyers have been overblown.

"A switch in sentiment in the housing market from negative to positive will occur once it becomes clear that interest rates have peaked, sometime later this year."

Interest rates have been raised five times over the last 14 months to 4.75, which has helped slowdown the housing market.

However, Mr Thomas believes that underlying economic conditions for the property market are favourable.

Interest rates remain historically low, economic growth appears stable, investment yields are competitive compared to other assets and demand for housing will remain high due to rapid population growth, he explained.

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