Fionnula Earley, CML chief economist, said: "This has undoubtedly affected confidence. Given the expected upturn in economic conditions, earnings are expected to continue to increase which will further support the housing market."
The move comes two days after Eddie George, the Governor of the Bank of England, said the boom was not confined to local "hot spots", fuelling speculation that interest rates may go up again next month. The CML also revised its forecast for the rise in house prices in the next two years: its estimate for 2000 is now 8 per cent, up from 6 per cent, and for 2001 it now expects a rise of 7 per cent, up from 5 per cent. The number of properties changing hands was expected to increase from 1.48 million this year to 1.53 million in 2000 and 1.55 million in 2001.
But the CML played down fears of a repeat of the boom-bust cycle of the late Eighties, insisting that the boom would not be shared by all regions of the UK, with the south of England continuing to be more buoyant than the rest of the UK.
"The economy now is not as strong or as volatile as the late Eighties," said Ms Earley. "While the economy has been improving, with low and falling interest rates the recovery has been much more controlled." The CML's revision leaves its predictions at the top end of the range of forecasts. Halifax, the largest lender, raised its 1999 forecast to 9 per cent over the summer while Nationwide hiked its prediction to 8 per cent. Deutsche Bank, which specialises in housing, has estimated a rise of 11 per cent.
Official figures from the Land Registry show prices are already rising at 10 per cent and according to Nationwide, prices in parts of London are rising at almost 30 per cent a year - close to the peaks in the Eighties.
The Bank of England said it was worried about the booming housing, consumer and labour markets when it hiked rates 0.25 per cent to 5.25 per cent hike two weeks ago. The CML said the Bank would not hesitate to raise rates to pre-empt any threat to its inflation target, suggesting that rates would not return to anywhere near the 15 per cent high in the Eighties that helped to trigger the collapse in the property market. It said it did not expect rates to rise beyond 6.5 per cent.Reuse content