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February 2, 2010    

House prices up 20% by 2013 CEBR predicts

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by Gill Montia

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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1 Comment »

  1. According to their website, CEBR is supposedly an “independent consultancy with a reputation for sound business advice”. mmm, I wonder who paid for this piece of research!!! Even back in February it was obvious that the country had a massive budget deficit, inflation was uncomfortably high, the world financial markets were skittish, and 1 in 5 were/are employed by UK Government. Let alone the fact that consumer debt is one of the highest in the developing world. This information means our economy / lifestyle is unsustainable at current levels - hence we will over time (12-18 months?) begin to feel the effects personally and psychologically (via the media and acquaintances). None of these factors are going to change and therefore property prices are “unlikely” to increase by 20% as confidence won’t allow it. Actually, I suspect we will have a slow decline lasting 6-7 years (totalling a maximum of 20% in total) before a marginal annual rise begins again in 2016.

    Comment by C Roberts — July 12, 2010 @ 7:25 pm

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