It said its revision was in light of a recovery in housing market activity in the second half of 2005 and the continued high level of remortgaging. Having earlier predicted house prices would be broadly flat over the period from 2005 to 2007 the CML now forecasts a rise of 4 per cent this year.
Over the next two years prices are predicted to rise by 2 per cent annually, and even though the number of property sales is expected to decline from 1.23 million in 2004 to 970,000 this year and 920,000 in 2006 and 2007, it says the high level of remortgaging will ensure gross lending remains buoyant.
However, the CML was quick to emphasise the outlook was for modest house price growth only.
Stuart Bernau, chairman of the CML, said: “Just as importantly we do not see any dramatically worsening arrears or possessions picture. While possessions may continue to pick up modestly over the next few years, they will remain substantially below the long-term trend.”
Martin Ellis, chief economist at Halifax, agreed with the CML’s outlook. He said: “House prices increased by 1.2 per cent in November [in the Halifax House Price Index] and overall they have increased by 4.7 per cent over the past six months. The high level of employment and good earnings growth continues to underpin housing demand.”
He added: “The slowdown in UK economic growth over the past year and the historically high level of house prices relative to average earnings are however expected to curb the recent improvement in housing demand and prevent another sustained period of sharply rising property values.”
