THERE has been a great deal of speculation following the recent horrific terrorist attacks as to how this will impact on the UK housing market. The Halifax house price index shows that UK house prices were unchanged in September (seasonally adjusted) and the annual rate of house price inflation in the UK has eased from 10.9 per cent to 8.3 per cent in September.

Martin Ellis, Halifax economist, said: "Recent interest rate cuts and the continuing fall in unemployment have boosted housing demand, causing house prices to rise sharply since the start of the year.

"Despite this trend, we have been expecting the general slowdown in the UK economy to curb housing demand and result in an easing in house price inflation during the latter part of this year and into 2002. September's figures give further support to this view."

While it is virtually impossible to predict what the knock-on effects will be for the housing market, Frank Knight claims it has started to see a clear picture emerging within the prime residential marketplace.

Immediately after the attacks, activity in the housing market was effectively suspended. However, transaction activity has now started to pick up and sales are being agreed, but only where there are both a serious purchaser and vendor. Realistic pricing crucial to ensure successful sale, even in the current climate.

The residential lettings sector is a diverse market, driven by an international tenant demand profile. As a result, the impact of the tragedies of September 11 is likely to vary in different parts of the country.

In areas where a UK tenant profile predominates, new tenancy activity has been strong.

However, in locations which are heavily dependent on American tenant activity the impact is uncertain. Before September 11, there had been a number of redundancies in the US banking sector, resulting in fewer senior employees relocating to the UK. But, in the immediate aftermath of the attacks, most employees who were already renting in the UK are remaining and tenancies are being renewed.

Supply levels remain restricted, with many landlords having recently left the market, having seen their assets benefit from strong capital growth. As a result, rental prices are holding up and are expected to continue to do so.

David Moulton, residential research manager at Knight Frank said: "Despite economic slowdown over the 12 to 18 months,

residential property market functions have remained generally healthy."