House prices will reach and surpass their pre-crisis peak next year. The claim is published in a report today by economic forecaster CEBR which says a typical house price will top £223,000 in 2014.
The quarterly Housing Prospects report also predicts that the average home price – based on figures published by the Office of National Statistics - will climb to £219,000 this year, 0.8 per cent higher than in 2012.
Looking five years ahead, a typical UK home will cost £261,000 by 2018, the report says, some 19.1 per cent higher than this year.
Daniel Solomon, CEBR economist, said: “UK property prices will be driven to pass their pre-crisis peak for the first time by fundamentals such as a return to modest economic growth and restricted housing supply increases.”
He added that policy tools, such as further quantitative easing and the Funding for Lending Scheme, could also support house prices.
Mr Solomon expects the Bank of England to expand its quantitative easing programme from £375bn today to £450bn by late 2013 which has the potential to increase mortgage lending and raise property prices.
He said there are also preliminary signs that the Funding for Lending Scheme - which encourages banks to lend to the real economy - could support mortgage approval values and make mortgages more affordable. That, in turn, could raise property prices.
Backing up CEBR’s claims have been a number of optimistic housing market reports. Last Friday, the Knight Frank/Markit House Price Sentiment Index showed that households in eight of the 11 UK regions expect that the value of their home will rise in 2013.
The optimism has emerged because of positive sentiment about the official mortgage scheme, according to Tim Moore, senior economist at Markit. “Households are increasingly conscious that the Bank of England’s Funding for Lending Scheme has the potential to boost the UK property market in 2013,” he said.
The Rightmove house price index published today shows that new seller numbers have climbed 22 per cent year-on-year and the property website reports that there was a 27 per cent increase in traffic in the first two weeks of January.
Mike Shipside, housing market analyst at Rightmove said: “There is an increasing body of evidence suggesting genuine ‘green shoots’ of recovery after a prolonged period of the housing market bumping along the bottom.”
Rightmove’s latest research into those intending to put a property on the market in the next 12 months shows that seven in ten potential sellers are motivated by discretionary factors rather than forced sale drivers such as the “three Ds” of death, debt and divorce.
Mr Shipside revealed: “This month’s average asking price of £229,429 is only 0.4 per cent below the highest January figure ever recorded, which was £230,428 in January 2008.
“The slow recovery in prices over the past four years will be welcome news to many of those who bought at the peak and whose equity was undermined. This will help those with the requisite deposit to think about trading up or moving on, especially in better-performing southern regions.”
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- Bank Of England
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- Office Of National Statistics