Agents predict housing slump by end of 2005

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The Independent Online

A third of estate agents believe there will be a house price crash before the end of next year, according to a survey published today by the industry's trade body.

Almost half of those thought the slump would be triggered by rising interest rates, while one-fifth warned of a bubble in the buy-to-let market, with the rest blaming a terrorist attack or media speculation.

The National Association of Estate Agents said its poll of 10,000 agents across the country showed the vast majority - more than two-thirds - saw no price crash in the immediate future.

However, 6 per cent expected one this year, a further 8 per cent believed it would start early next year, while almost a fifth said it would begin towards the end of 2005.

"With prices continuing to rise there is inevitably talk of a crash," said Melfyn Williams, the president of the NAEA. "However, it is looking unlikely that we will see dramatic falls this year. And when the market eventually slows, it will be a softer landing than the spectacular crash predicted by some doom mongers." His comments echo those from other industry bodies such as the Council of Mortgage Lenders, Halifax bank and Nationwide building society.

Martin Ellis, Halifax's chief economist, said the UK would escape a house price crash but its soaring property market was likely to cool by the end of next year.

"Past crashes have always been triggered by something and have usually been set off by high inflation," he said. "We do believe there will be a gradual slowdown to get on to a sustainable long-term path."

Optimists believe the cautious approach to raising rates taken by the Bank of England means activity will slow gradually rather than suffer a severe correction.

However, others, such as the International Monetary Fund, the City analyst Capital Economics and the stockbroker Durlacher, warn that prices could crash by up to 30 per cent.

Meanwhile Rightmove, a property website, said prices rose 2.4 per cent in April, pushing the annual inflation rate to 15.6 per cent. It said the owner of the average home had "made" almost £14,500 in the past three months, equivalent to £1,100 a week, thanks to an 8.3 per cent rise in property prices.