2013: Mainstream property hopes - FT.com Hopes are high for a recovery in the UK housing market in 2013 as government stimulus measures finally kick in. But in contrast to past years, the top end of the property market is expected to struggle. Although the mainstream market was largely stagnant during 2012, it began to show signs of improvement towards the end of the year. House prices were up on average by 1 per cent across England and Wales, and mortgage approvals were 19 per cent higher compared to June. Analysts believe the government's Funding for Lending Scheme could help boost the UK housing market in 2013, despite its slow start. According to Capital Economics, if all 35 institutions that have signed up to the programme borrow close to the maximum of £70bn, then the impact on mortgage rates and lending could be much larger. The Royal Institute of Chartered Surveyors is also optimistic. In its forecast of the housing market in 2013, it predicts the number of homes sold would climb by just over 3 per cent, from an estimated 930,000 to 960,000 next year. This would be the highest level of sales since the crash - but would remain way below the peak seen at the height of the boom in 2006, when 1.67m homes were sold. "We suspect that the benefits of the government's array of measures will become a little more visible over the coming year and have already suggested that more mortgage finance will become available," the trade body says. As a result, RICS estimates that average house prices will rise by 2 per cent in 2013. Estate agents share their views: Hamptons International is predicting an average increase of 2 per cent across the UK, while Jones Lang LaSalle has forecast a 1 per cent rise. However, prices will continue to vary between regions, although some analysts are predicting this variation in regional growth performance to narrow slightly. "2013 will still have huge regional and local differences," said Henry Pryor, a property buying agent. There is no one index that works for all but while there will be falls for many and rises for a few, we won't see a house price crash in 2013. One part of the market not expected to fare so well is prime central London. Bucking the trend of strong price rises over the past three and a half years, which has seen central London values rise to 22 per cent above their 2007 peak, growth is expected to be flat in 2013. Four of the big high-end estate agents - Savills, Knight Frank, Hamptons International and Jones Lang LaSalle - all predict zero-growth for 2013. The introduction of higher taxation for high end properties worth £2m and more, and a new annual levy and capital gains tax charge for homes held in a corporate vehicle will continue to have an impact on the market next year. "Increased taxation, including the stamp duty levy, strengthening sterling and a weakened global economic outlook could all provide catalysts for a slowdown," said Yolande Barnes, director of Savills world research. Camilla Dell, managing partner at Black Brick, a property buying agent, believes the sub-£2m sector will be the best-performing price bracket in 2013. "Immune from the higher stamp duty burden and safe from whatever measures the government has in store for higher valued properties held in offshore structures, the lower end of prime is likely to remain the principal focus for buy-to-let prime investors," she said. The outlook for commercial property also remains weak for next year. There is expected to be further short-term pressure on capital values and rental growth, but prime commercial property, particularly in London, will continue to outperform, according to the F&C Reit Property Review and Outlook. "The weak state of the economy has seen void rates - periods when properties are empty between tenants - on the rise and has added downward pressure on rent negotiations," said Jason Hollands of Bestinvest. There is also a big pipeline of property refinancing due in 2013/14, so we think the risks of banks refusing to extend credit on non-performing loans at reasonable terms are significant. This could result in a lot of stock coming on to the market which is unlikely to support capital valuations," he added.