Any rebound in house price inflation will be temporary

Tighter supply conditions suggest that the moderation in house price inflation may be about to go into reverse. So, too, do solid rates of economic growth and job creation as well as tentative signs that mortgage credit conditions are easing. That said, although we do not think that they will prove unduly problematic, interest rates are also poised to rise and investor activity has cooled markedly in recent months as housing has become less undervalued. And neither expectations, nor asking price data show any signs that a new surge in house prices is imminent. Thus, on balance, we expect prices to rise by 4% next year.