The housing market will continue to grow for at least another 18 months, according to research from property consultants FPD Savills.

The study predicts that house prices will rise by 12% during 2003, although in central London they are expected to grow by just 4%.

However, a slowdown in the top end of the London property market is unlikely to be replicated in the rest of the UK during 2002, the report said.

The survey is more optimistic than one published on Monday by housing analyst Hometrack, which slashed its outlook to 4% for house price growth in England and Wales next year, and predicted property prices in London would fall.

Catch-up

Double-digit house price inflation has been caused by a combination of low interest rates, relatively high disposable household income and the popularity of property as an investment when stock markets have performed poorly.

FPD Savills predicts this scenario is likely to continue outside London during 2003.

"There is a slowdown in the very top end of the market in London and the south east but what is happening in financial services in the City doesn't effect Mr and Mrs average in Nottingham," said Richard Donnell, head of FPD Savills resident research department.

He added that the UK housing market outside of the south east was now playing catch-up and there was still room for substantial growth.

The Hometrack report released on Monday predicted that London prices would fall by 5% next year, while prices in England and Wales would rise on average by only 4%.

The governor of the Bank of England, Sir Edward George, has also suggested that house price rises are set to cool.

Speaking to Parliament's Treasury Select Committee on Tuesday, Sir Edward said he thought price rises would moderate "to zero, or maybe minus a bit in some parts of the country in the next couple of years".

Rental strength

The rental market is showing signs of buoyancy according to new figures from the Royal Institution of Chartered Surveyors (RICS).

Demand for rental property has reached its strongest level so far this year.

RICS said 18% more chartered surveyors had reported a rise in the number of people looking to rent than those who had seen a fall.

Potential first-time buyers, unable to afford to get a foot on the property ladder, are believed to be the main impetus behind the rise in demand for rented property.