Fears that the housing market is spiralling out of control were rekindled last week after a report by the Halifax claimed that prices had risen 30.6% for the year to 31 October. The press speculated this would lead to a repeat of the boom–bust last seen in the late 1980s and early 1990s.
However, Tony Pidgley, managing director of Berkeley Group, said a "normal market" was prevailing. Berkeley is experiencing price rises of 5-8%. It has also sold 42 of the 92 apartments in its Chelsea Bridge Wharf development since they went on the market five weeks ago, a rate Pidgley said was a sign of a strong, rather than an overheating, market.
"Look at the major housebuilders," he said. "None of us are showing house increases to that level – or we'd all be doing very, very well."
Colin Cole, deputy managing director of Westbury Homes, said the company was experiencing rises of about 10%. He said this may fall to 3-5% next year but that the market would remain strong.
One senior City analyst predicted that housing market inflation would slow down to between 0% and 5% over the next year, but warned that unemployment levels must remain low. "You don't often see bubbles that don't burst, and the fear is that house price inflation may become a bubble. Unemployment is the key thing, and that's ok at the moment."
The RICS' chief economist, Milan Khatri, said there was no evidence the housing market would collapse. "Interest rates aren't going up and unemployment isn't rising," he said. "In the next three to four months there is no credible threat. The difference now is what's happening in London and the rest of the country – the rest of the country is playing catch-up on prices."
Khatri added that a RICS survey suggests that any market slowdown is seasonal, with the underlying market trend remaining strong.
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