House prices up 20% by 2013 CEBR predicts

The Centre for Economics and Business Research (CEBR) has revised its figure for house prices rises in 2010 and is now predicting an annual gain of over 6%.

Furthermore, the independent consultancy is expecting a 20% increase in the value of the average home by the end of 2013.

The forecast is based on continued improvements in the availability of mortgage finance, a shortage of properties and the base rate remaining at 0.5% until well into 2011.

According to CEBR, unemployment will restrict house prices rises up to 2011, but the UK’s shortage of housing stock will eventually take the average value of a home from around £167,000 today, to £210,000 in 2013.

CEBR spokesman, Benjamin Williamson, says: “The fact that house prices have already risen by almost 10% since the bottom of the cycle has surprised most commentators.”

He adds: “However, with the rate of mortgage lending more than doubling over this period of time, a shortage of new properties on the market, low interest rates and unemployment not rising nearly as fast as expected, it is easy to see how prices have moved so quickly.”

Last week, Nationwide reported that the average price of a home rose by 1.2% in January, compared with a month earlier.

The ninth consecutive monthly increase put the average value of a UK home at £163,481, showing a year-on-year gain of 8.6% (up from 5.9% in December 2009).

However, the lenders’ chief economist, Martin Gahbauer, pointed out that the rebound in the housing market has gone some way beyond the recovery in the overall economy.

With pay inflation near zero or even negative, every increase in house prices worsens housing affordability and Mr Gahbauer believes this limits the potential for the current recovery in prices.

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