LONDON-Central London residential property is likely to underperform the rest of the UK market for the second year running in 2003, according to new research from FPDSavills. The firm is forecasting average UK house price growth of 12% in 2003, but expects only 4% growth in central London.

According to Richard Donnell, head of FPDSavills’ Residential Research Department the UK is facing a north-south split. He forecasts “high levels of affordability driving high house price growth in the northern regions and low levels of affordability in London and the South East which is leading to much slower growth in house prices.”

And despite Government concerns that house price growth is fuelling general inflation in the UK, Donnell believes the housing boom is not yet over. “The downward shift in interest rates from an average 11.5% over the 1980′s to an average of 5.5% over the 1990′s has given households a huge boost to spending power when it comes to buying a house” he said. And the doubling in household incomes since the peak of the market in 1989 has also boosted buying power. He believes it may not be another 12 to 18 months before these factors decline in importance.

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