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Property prime time is over with 5% rise forecast

Residential property will only increase in value by 5 per cent this year, almost two-thirds less than 2001&#39s 14 per cent growth, says broker FPD Savills.

Its latest research bulletin claims weaker economic growth, falling employment and slower increases in household income are acting as drags on house prices, but it predicts increases of 7 per cent in 2003.

The threat of increased unemployment is the biggest risk to the housing market according to Savills. It says that unemployment has star-ted to rise in recent months, reversing a nine-year downward trend and this is likely to take its toll on consumer confidence.

Savills is forecasting slower growth for what it calls prime housing markets, with only a 3 per cent growth in prices expected for central London.

Although it says the affordability of housing is not a problem for the aver-age household, in parts of London and the South-east prices housing is becoming increasingly unaffordable for a growing proportion of households.

In those areas such as the South-east where the supply of housing is constrained and demand has expanded house prices have grown by up to 112 per cent in the last five years.

It says that the relatively high growth in real house prices since 1996 should be linked to values rising strongly from their over-discounted levels of the early 1990s rather than the run-up to another unsustainable house price boom.

Savills director Mark Harris says: “Despite lower forecasts than previous years, the outlook is still positive, with property prices expected to increase by 5 per cent over 2002 and 7 per cent over 2003.”

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