House prices to rise by 15% in just five years as homes shortage takes hold

Published 25th Nov 2011

* Property values to increase by 15% by 2016

House prices will increase by 15 per cent over the next five years due to a shortage of available properties, according to economists.

The price of the average three-bedroom home will rise by more than £25,000 from £176,184 to £202,068 by 2016.

Despite the economic downturn, the upswing will be the result of a persistent shortage of housing and quantitative easing - when the Bank Of England injects cash into the economy making it easier to get a mortgage.

House prices will rise gradually, by 1.6 per cent next year, before reaching an annual increase of 4.3 per cent in 2016, according to the Centre For Economic And Business Research (CEBR).

Douglas McWilliams, chief executive of CEBR, said: 'It Is important to realise that the UK has a housing shortage, which is shown by the recent rises in rents.

'In addition, the very ­weakness of the economy, which will almost certainly mean more quantitative easing by the Bank of England, means that gradually mortgages will be easier to come by.

'By 2016 we are forecasting 740,000 new mortgages a year – up from an estimated 560,000 this year but only just over half the peak 2006 level.

'Both the shortage of supply and the growth in mortgage availability will push up house prices, though only slowly at first.'

While the news will come as good news to home owners, it adds to the woes of the millions paying ever-increasing rent and unable to get a foot on the property ladder.

A report by Skipton Financial Services this week revealed that the average family now needs to bring home £24,600 a year just to break even.

Researchers added up basic costs such as mortgage or rent, utilities, insurance, groceries, motoring, clothing, mobile phones and commuting.

But the figure does not include any luxuries - such as takeaways, restaurant meals, nights out, weekends away or holidays.

It comes as official figures revealed the average public sector worker earns nearly £4,000 a year more than a typical private sector worker.

The news comes just days after it emerged that the average family now needs to bring home £24,600 a year just to break even. Researchers added up basic costs such as mortgage or rent, utilities, insurance, groceries, motoring, clothing, mobile phones and commuting.

Andrew Barker, managing director of Skipton Financial Services which carried out the study of 2,000 households, said: 'It's frightening how everything adds up.

'The cost of living is astronomical and now more than ever people have to be on the ball with their expenditure and to keep on top of things, particularly at a time where inflation is riding well above target at five per cent.

'Inflation continues to hit families hard with the rising prices of food, petrol and energy bills.

'It is not surprising mortgage interest is the number one spend, even though interest rates are at rock bottom levels.

'However, it is incredible to see the cost of feeding the family is almost as expensive at almost £4,500 a year.'

Source: ' ThisIsMoney '

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