Housing market 'not set to crash'

The house-price boom is over - but homeowners can expect a gentle slowdown, not a crash.

And the forecast is that prices will fall slightly this year, stabilise in 2005 and then climb steadily over the next few years.

The recovery will begin in 2005 and by 2008 it is predicted prices will have risen by more than 11 per cent.

Over the next five years the traditional residential favourites, mostly in west London, will see the strongest growth in prices, while recent high performers on the eastern side will lag behind. Richmond, Hammersmith and Fulham, Kensington and Chelsea, Westminster, and Camden are all set to witness house-price growth of more than 16 per cent over this period.

Compared with past performance, when some of these areas saw price rises of nearly 20 per cent or better for years, this is tantamount to stability.

Among the east London boroughs, Tower Hamlets is expected to see house prices rising 16.7 per

cent over the next five years.

Your Mortgage editor-in-chief Andrew Stuart said: "It is the top-end Thames-side developments that are forecast to see the biggest increase in value, most likely as a result of the return of big bonuses to the City.

"These properties have also proved popular with foreign City workers in the past, particularly American bankers, who are returning to the City job market after a lull."

Boroughs set to experience the lowest house-price increases include Newham, Redbridge, Barking & Dagenham and Havering.

Newham, which has enjoyed steep rises over the past two years, will see average falls of almost four per cent.

Mr Stuart said: "Newham's prospects may well have been damaged by the continuing uncertainty over the proposed Crossrail service.

"This project is still very much in its infancy, with basic funding issues still to be addressed, to the disappointment of many in the area. Barking & Dagenham and Havering had substantial price increases last year. But these boroughs have a high proportion of social housing, which limits their potential for further increases."

The data was compiled for Your Mortgage by Prophit, an organisation

that specialises in mortgage and housing research.

? The price of country homes rose by more than 10 per cent in the first half of 2004, according to estate agency Knight Frank.