Date Published 23 August 2011
New research from the Centre for Economics and Business Research (CEBR) suggests that the housing market will make a recovery over the next two years before house prices push upwards to reach a record high, 14 per cent higher than their current levels, by 2015.
The report from the CEBR predicts that the average cost of a home in the UK will increase from its current value of £176,000 to more than £200,000 by 2015. This would take prices well beyond the previous peak in 2007, when the average house was worth £191,000.
The CEBR says that one reason for the expected increase is the lack of new houses being built. The CEBR says that 225,000 new homes need to be built each year to cater for the demand for new homes but it forecasts that only 110,000 will be built.
There are various reasons why 225,000 new homes need to be built, according to the CEBR. One is the trend of more people living alone and another is the increasing population of the UK.
Back in May, the CEBR predicted that house prices would rise by 16 per cent by 2015. A 14 per cent increase by 2015 is less than the current level of inflation which is 4.4 per cent. However, the Bank of England and most economists expect inflation to fall back towards its target level of two per cent during 2012.
The CEBR report concluded that the rise in house prices will not take the form of a house price boom, but will be a gradual rise based on supply not meeting demand.