The housing market is not about to crash, according to the latest Savills UK Residential Research Bulletin. Low growth in 2005 seems to have constituted the full extent of the housing market slowdown, with house price inflation excelling in 2006. ‘Strong demand coupled with competition for very short supply of the right type of property in the right place will fuel further price rises,’ Yolande Barnes from Savills Research commented, ‘We are forecasting growth in the UK residential market of 7% in 2007.’

Only a severe external economic shock or very unpleasant inflationary surprise could cause prices to plummet, according to Savills. An annual price growth of 9% is predicted for the end of 2006 with growth in prime central London as much as 20%. Prime and southern markets are leading growth, fuelled by overseas equity and City bonuses,’ said Ms Barnes. ‘Prime markets look set to out perform the mainstream and we can expect to see high growth in the prime country house market as they’re a rare commodity that is not being made anymore.’

Growth of 15% is forecast for prime central London in 2007, leading Savills to conclude the market slow down in 2005 has been reversed. ‘At the moment, it looks as if the housing market ‘landing’ was a positively bouncy one – and that the ‘2005 slowdown’ was the full extent of it,’ Ms Barnes explained.

Thus Savills contradicts David Miles at Morgan Stanley who is predicting a substantial fall in house prices in the near future due to the speculative nature of the market. ‘We believe the housing market is not overheated and there is no bubble to burst. Price levels are high and large, growing numbers of households are unable to buy their homes but this is due to inadequate supply rather than a speculative bubble,’ said Ms Barnes.