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House prices to rise 25% over 5 years

Monday, 28 July 2008 12:00 AM

House prices are set to increase by a quarter over the next five years, according to an optimistic report from the National Housing Federation (NHF).

Released today, the independent research suggests a shortage of new properties coming onto the market will see the average cost of a home rocket to £274,700 over the next half decade.

This, however, will follow a difficult 18-month period during which prices will continue to fall.

In a separate report released today, property analysts Hometrack find average prices fell for the tenth consecutive months in June - with annual falls now totally 4.4 per cent.

Some of the largest dips have been in Northern Ireland, according in-depth regional research from the UK's largest mortgage lender, Halifax.

Yet, in the long-term the picture is remarkably rosy, finds the NHF.

"Our report shows that despite concerns about the current housing market downturn, house prices will increase substantially over the mid to long term," said NHF chief executive, David Orr.

"Demand for housing is going up, while the supply of new homes is going down."

The organisation - which represents independent non-profit housing associations in the United Kingdom - argues demographic change, with people living longer and divorcing more, will be a key driver in future house price growth.

Across the country is it the south-east which is set to experience the sharpest increase in prices, with the NHF estimating a home will be worth £365,000 in 2013 - an increase of nearly 37 per cent compared with the end of last year.

Furthermore, the price of a home in London is expected to rise by 15 per cent - to almost £410,000.

The government has outlined plans to build two million new homes by 2016, with a further one million, carbon neutral, properties added by 2020.

It is hoped this will alleviate the perceived shortage of supply in the market, and drive prices down.

However, the credit crunch has altered the picture dramatically in recent months, with the number of new-build properties being completed falling closer to 100,000 annually that the 180,000 a year required to meet the target.

Just 75 per cent of the homes required in the UK are being built, finds the NHF.

Chris O'Toole

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