Overall, FPDSavills Research expect the rate of house price growth to slow to 5% by the end of 2002.

Values are rising at somewhere between 14% and 16% per annum and are now some 52% higher than they were at the peak of the boom in 1989. "Ultimately this strong growth in house prices is the result of a major imbalance between supply and demand in the UK's housing market", says Richard Donnell, head of residential research at FPDSavills. "Strong levels of employment growth and rising household incomes have also greatly increased the demand for housing. This, together with the UKs chronically low level of new house build, the lowest per capita rate in the western world, has resulted in the strong growth in average house prices", he adds.

Yet, FPDSavills Research calculates that the combination of rising incomes, levels of equity and lower interest rates should have resulted in a 150% growth in average house prices since 1992. That values have only grown 77% during this period suggests that house prices could go even higher. "They have not because households now choose to spend less money on housing in favour of increased spending on leisure, travel, savings and investments", says Donnell.