Speaking on the BBC’s Money Box programme, Charles Collyns, deputy director, research department at the IMF, said: “Strong growth in house prices is justified by the strong growth fundamentals of the UK economy, that we’re not expecting a collapse of home prices.
"On the other hand, in the UK, as in some other countries in Europe, there has been a massive increase in home prices that does seem to have gone somewhat beyond what’s justified by the fundamental factors.
“Certainly we expect the rate of increase to soften. Our own projections are based on an assumption that house prices will be flat over the year ahead, but I wouldn’t rule out that house prices might also decline somewhat, particularly in some areas like London where there has been such large increases.”
Halifax chief economist, Martin Ellis, who also spoke on the programme, said: “We think the market is in a healthy condition and although we do expect it to slow down, and that house price growth will actually be somewhat lower next year than it has been this year, we’re still expecting house prices to increase overall. By a modest amount in 2008, broadly in line with average earnings.”
Stewart Lilly, president of the National Association of Estate Agents, said: “We all need to be prepared for a difficult sales environment over the coming months. There are certainly no signs of a crash, as has been suggested by some, however.”
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