AN ECONOMIC review from the Institute of Directors (IoD) is predicting that although property prices in Kent may well slow down there will be no price crash similar to that of the early 1990s.

The summer economic review from the IoD entitled Housing Hiss or Pop? presents a new Housing Affordability Index (HAI) showing that while the risk of nominal house price falls cannot be ruled out, it would be more reasonable to expect a sustained period of low house price growth over the coming years.

The IoD’s Housing Affordability Index stands well above the long-term average now, but can be expected to adjust towards a much more affordable valuation over the next few years, as the interest rate cycle reverses.

The IoD Housing Affordability Index was about 35 per cent above the long-term average in the second quarter of 2007 and this compares with a peak in 1989 of 67 per cent above the long-term average.

Slower house price growth and a future reversal in the interest rate cycle should combine to restore affordability towards five to 10 per cent above the long-term average by 2012.

IoD Kent Chairman Frazer Thompson said: "It looks far more likely that the housing market will go hiss rather than pop. While one can never say never, the conditions for a house price crash are not yet present."

In the early 1990s higher inflation and unemployment, with housing market difficulties created by ERM membership, created conditions for a 10 per cent reduction in nominal prices. This time the macroeconomic environment was very different.