UK house prices are set to rise by 6% during 2007 and then by another 3% in 2008, predicts Knight Frank’s latest report on the housing market. The areas set to do well going into next year are southern England, and Northern Ireland, as sales volumes fall slightly while growth rates settle.

Central London prices should end the year 32% higher, says the report, although growth is set to be much lower for the next twelve months, at a rate of about 3%, while prime country house prices are expected to rise by 5% next year.

‘Over the course of 2007 sales volumes have remained high by historic standards, and will end the year around 8% above their long term average,’ it says. ‘Buy to let activity has remained high, confounding many of the more pessimistic economic commentators and despite ongoing affordability constraints, the market has been far more healthy than expected.’

Knight Frank’s expectations for next year are a continuation of the market going into the forth quarter of the year, as the sellers market quickly replaced the buyers market in quarter three: ‘The new market sentiment means that vendors are having to compete with much harder to achieve timely sales and ambitious pricing has effectively ended across the prime and mainstream markets,’ states the report.

Knight Frank now expects the market to behave very much like it did in late 2004 and early 2005 going into next year, an expectation also held by economists at Capital Economics. ‘The prime markets are likely to perform better than the mainstream markets ? but not by a wide margin,’ Knight Frank concludes. ‘Vendors of the very best properties will still be able to name their own price (almost), but for the rest of the market, price growth will be noticeably lower than that seen in recent months.’