The price of an average London home will rise to at least £500,000 by the end of the decade – an increase of more than 30 per cent on today's £383,000 average – according to research published today.
The Centre for Economics and Business Research says that while London house prices will rise less slowly in 2013 than they did in 2012 they will start to take off again towards the end of the decade as the capital's economy begins to pick up strongly.
Outside the capital, the North-South divide will become even greater. While the South-East and East of England will see prices rise by 24.8 per cent and 25.7 per cent between 2013 and 2018, prices in Northern Ireland and the North-East are forecast to grow by just 6 per cent and 2.3 per cent respectively over the same period.
Daniel Solomon, Cebr economist, said: "Before the decade is out, we predict the price of the average home in London will reach £500,000.
"House price rises will be driven by London's comparatively rosy economic growth prospects, buoyed by IT, business and professional services. Nevertheless, house price growth in London will remain notably slower than in the boom years before the financial crisis."
He added that London would continue to be buoyed by high rates of immigration, which will not only create demand for housing but also inject skills, languages and international commercial links, which would all boost its economy.