House prices to rise 5pc this year, predicts cebr

Published 04th May 2010

House prices will rise by 5 per cent during 2010 despite their sluggish start to the year, research claimed today.


The Centre for Economics and Business Research (cebr) said a combination of low mortgage rates and a shortage of new homes being built would push up house prices by 5.3% during the year to average £172,500.

It then expects lower price growth of 3.4% during 2011, followed by a strong rise of 9% in 2012.

But it warned that cuts in public sector jobs and very low wage inflation could limit the scope for house price inflation.

Its forecast is also slightly lower than its previous one for the year, of house price growth of 6%.

The group is also predicting that average mortgage rates will fall from around 4% now to 3% by the beginning of 2011.

It said the drop would be driven by the money markets pricing in the impact of cuts to the Government's budget deficit.

The research also expects the Bank of England's key interest rate to remain at 0.5% throughout this year and next.

Benjamin Williamson, one of the report's authors, said: ''A lot has happened to affect the housing market in the past three months but the net effects have more or less cancelled each other out.

''A very cold and snowy winter limited housing activity until well into the spring, an effect exacerbated by the ending of the stamp duty holiday.

''Then, in the Budget, stamp duty was reformed, with a zero rate on properties below £250,000 in value for first-time buyers and a new 5% rate for properties with values over £1 million.

''Yet we have only marginally revised our forecast from a rise of 6% during 2010 to a rise of 5%.''

Source: ' Telegraph '

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