Will prices rise or fall during the next twelve months? The Halifax predict a fall.

By how much? By 2% on average in the UK . After nine years of rising house prices, the average home has increased in value by 160%. Past major housing market downturns have all been caused by a combination of economic recession, steeply rising unemployment and significant rises in interest rates. "There is very little likelihood of a similar combination occurring over either in the short or medium term," the bank says.

What will happen to interest rates over the next twelve months? The Halifax predicts they will reach 4.25% by the end of 2005 (currently 4.75%).

Did it get it right in 2004? It wasn't far off. It said interest rates would be 4.5% by the end of 2004.

Regional winners and losers? The north/south divide will narrow further during 2005, the bank predicts. Regions that have seen the biggest price increases over the past year - northern England , Wales and Scotland - are expected to cool down. Modest price rises in Scotland and Northern Ireland are predicted. The biggest price falls are predicted in the South East, London and the South West. Modest falls are expected in East Anglia , East Midlands and West Midlands , returning prices to levels seen in late 2003.

Hope for first-time buyers? The rate at which earnings are rising will exceed the rate at which house prices are growing. Lower interest rates during 2005 will cut mortgage costs for new borrowers.

2005 overview: "Fundamentals", namely low interest rates and high employment, remain "sound", the bank says. Lack of housing, especially in the south of England , will underpin the market.

How good is it at forecasting? Prices have risen by 12.3% so far this year, which is about half way between the two estimates it gave for 2004. In December 2003, it said prices would rise by 8%. It later revised this to 16% in June.

Nationwide , UK 's biggest building society:

Will prices rise or fall during the next twelve months? Rise.

By how much? By 2%, the society predicts. But it acknowledges there are increasing pressures on the market. Five interest rate rises have increased mortgage payments. As a proportion of take-home pay, mortgage costs have risen from 24% to 30%. "Negative media comments" have also led homeowners to dampen their expectations of future house price rises. Properties have become less affordable in parts of England , particularly the North, North West and Wales , acting as a brake on the market.

What will happen to interest rates over the next twelve months? The society predicts they will be 5% by the end of the year, with one more quarter point rise expected in the first half of the year.

Regional winners or losers? The North, North West , Yorkshire , and Wales all experienced the fastest price rises during 2004. In 2005, they will experience the biggest slowdown in growth. House prices in these areas are the most unaffordable out of all UK regions. Prices are expected to rise fastest in Northern Ireland and slowest in the North West .

2005 overview: The key to the future of the housing market are employment prospects, the society says. These are expected to remain good. The housing market will not come to a "full-scale emergency stop" but will experience a "gentle braking".

Although it is hoping for a soft landing, it admits this could prove a "false dawn". The doubling of prices over the last four to five years means the housing market is now more highly valued and vulnerable to economic shocks or changes in "buyer sentiment" than in previous years. Uncertainty surrounding economic policy with an election around the corner may also contribute to property falls.

What is its forecasting track record? Like the Halifax , it's not bad. House prices rose by 13.2% in the first eleven months of 2003, according to Nationwide. This was slightly higher than its 2004 forecast, published last December, which predicted a rise of 9%. Following an unexpected strong start to 2004, Nationwide revised this up to 15%.

Hometrack, a property research company

Will prices rise or fall during the next twelve months? Neither. On a national basis, prices will stay the same, the firm predicts. 2004 has been a rollercoaster year for house prices. The first six months saw continued price rises before the market turned in July. By November, Hometrack had reported a 0.6% decrease in house prices, the fifth consecutive monthly fall of the year.

2005 overview: Prices should continue to fall in the first few months of 2005, by up to 3%. But as the market stabilises, we should see a stronger performance in the last six months and house prices should finish the year in the same shape they started it and therefore unchanged over the year.

Hometrack says three key factors will underpin the market - household incomes are increasing by 5% a year, unemployment is continuing to fall and banks are lending more generously.

Capital Economics, Independent economic research company

Will prices rise or fall over the next twelve months? Fall.

By how much? By 7%.

What will happen to interest rates over the next twelve months? The firm predicts rates will be 4.5% by the end of 2005.

2005 overview: With valuations now so stretched, Capital Economics believes that recent falls in house prices are likely to develop their own momentum in the months ahead. What is being currently witnessed in the market is the start of a prolonged period of falling house prices.

Although the traditionally busy New Year period could yet bring some relief to the market, any upturn is likely to prove both modest and temporary.

It believes house prices are 20% overpriced and there will be an equivalent 20% peak-to-trough drop in average house prices.

This will put the market onto a more sustainable footing.

Royal Institution of Chartered Surveyors, an industry body

Will prices rise or fall over the next twelve months? Rise.

By how much? By 3%. It expects the first half of 2005 to be fairly weak as the impact of interest rate rises continues to put off buyers.

However, with the economy continuing to display underlying strength, and growth in new jobs, a mild rebound in the housing market is likely in the latter half of 2005.

Regional winners and losers? House prices in southern regions will marginally under perform the national average due to greater sensitivity to recent increases in interest rates.

However, the northern regions will not fare much better because of the levelling off of demand, particularly from buy-to-let investors.

2005 overview: The market will remain weak into the first half of 2005 as the full impact of recent interest rate rises is felt. However, the wider economic climate remains fairly good, with consumers showing few signs of being alarmed by the sharp slowdown in the housing market. Buy-to-let landlords have also failed to be panicked by recent price falls and are generally not selling their investments. Employment and incomes are expected to continue rising at a steady pace in 2005 which are likely to provide some support to housing demand and prices in the latter half of 2005 and keep prices stable.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.  

Article courtesy of bbc.co.uk