A STEADY future for the housing market is being predicted. According to the National Association of Estate Agents' latest report, low interest rates, a strong investment interest and restrictive planning policies are likely to ensure a steady market during the coming year.

The report says that the current housing activity shows signs that consumers are exercising caution rather than panic. The September 11 atrocities have, says the report, cast a shadow over world economic performance with a direct impact on certain UK sectors but the housing market has held up well.

Hugh Dunsmore-Hardy, NAEA chief executive, said: "We expect house transactions to finish 2001 at around 1,390,000, three per cent down on 2000, with house prices ending the year seven per cent ahead, outperforming expectations and with much growth coming from developments in the south of the country.Ó

Looking further ahead, the report says that 2002 is likely to be "boring" rather than "bad" for the UK economy and a more subdued housing performance is expected with house prices predicted to rise by just four per cent over the year and the numbers of transactions staying fairly steady at around 1,389,000.

There is growing evidence of a strong investment motive returning to the housing market, particularly in London and the South.

Mr Dunsmore-Hardy, said: "Since 1995 capital growth in the London housing market had easily kept pace with equities and has outperformed the UK price trend.

"Since 1999 London prices have outperformed the FTSE and investors have returned to housing in response to volatility in the equity markets and the ready availability of credit."

The number of "buy to let" mortgages has, he says, increased by 45 per cent by volume and 56 per cent by value in 2001 compared to figures for the previous year. Planning policies and a lack of availability of new land for housing developments have meant property builders in the south of the country have reported a fall in completions of between five and 10 per cent - a factor which is restricting supply of housing stock and ensuring that demand is still ahead for matching supply across the region.

A key feature throughout 2001 in keeping the market steady has been low interest rates and affordable debt which has led to high demand in the remortgage market.