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Will the bubble burst?

As optimism continues within the residential housing market, leading property web portal,, has raised its forecast for the average annual property price increase to 6% for this year. In January they predicted a 2% rise which they doubled to 4% only two months ago – and up to 6% just this week.

Many home owners will see this as good news, but warning signs are already starting to appear, with the Royal Institute of Chartered Surveyors expressing concerns over another housing bubble akin to what we saw from around 2003 to 2007.

These views have been supported by Vince Cable, the Business Secretary. During the recent Lib Dem party conference Mr Cable expressed fears that we may be getting back to the times when the market got out of control and banks and building societies lent money based on unrealistically high prices. He also questioned the wisdom of certain aspects of the Government Schemes designed to help (particularly first time buyers) people get on to the housing ladder.

There are also fears that just a small percentage increase in lending rates could start to see borrowers fall behind on mortgage payments and repossession numbers start to increase once again.

Nick Clegg rejected the suggestion that we might be getting back to what happened in the height of the market around six years ago, but what is clear is that a continuing lack of housing stock can only lead to a hike in prices as demand exceeds supply.

In Lancashire we are certainly seeing more conveyancing transactions taking place and a slight upward movement in prices. In my view we are some way behind what is happening in London and the South East but there are definite pockets of stronger than average activity in parts of our region.

It certainly feels like the right time to get on the housing ladder but we are clear in our advice, particularly to first-time buyer clients: always plan for interest rate rises when assessing what you can afford. So, if there is another “bubble” on the way our clients won’t be caught out if that bubble ever bursts.