The UK housing market has suffered throughout 2005 but will see a burst of activity in spring 2006 before returning to steady sustainable growth with an average 2% price inflation over the year, predicts new homes website SmartNewHomes.com.

The average price of a new home has fallen by around 2.5% since the beginning of the year as demand slows amidst uncertainty in the marketplace. Buyers are acting more cautiously than in previous years and sellers, including homebuilders, have found that it is not as easy to sell a property.

David Bexon, managing director of SmartNewHomes.com, commented: "The new homes market has not escaped the wider slowdown in activity experienced across the UK this year. Average prices are no higher than they were at the end of last year and many housebuilders are finding properties are not selling as quickly as they have done in recent years. However it has by no means been the ‘annus horribilis’ that was predicted by some."

"There are signs that the housing market is beginning to recover from its year-long slump, although it is too early to call whether this will be a full and imminent recovery. A lot is hanging on the first 12 weeks of 2006: circumstances should permit a reduction in the base rate but the Bank of England has already shown its reluctance to cut from 4.5%. It is therefore more likely that we see a stick at the current rate and maybe even a quarter of a point increase later in the year. This will not increase consumers’ confidence but by now the majority of the public have realised that we are not going to see a market crash."

"Although there will be an increase in activity as the market experiences the usual spring boom, we are not going to see the high levels of inflation of recent years and the government’s decision to reverse Sipps allowances for property investors will not help."

"The UK housing market has left behind the years of rapid growth and we are now in a new phase for the market. We will certainly not see a decrease in prices or activity, but the difficulties facing developers this year will still be present for the foreseeable future. It is more likely that 2006 sees a continuation of steady and manageable single digit growth. By the end of 2006, house prices should have risen on average by around 2%, with annual change slightly above that figure in Yorkshire and Humberside, the North East and West Midlands."