House prices are expected to rise by 14% over the next four years, according to the influential think-tank, the Centre for Economics and Business Research.
The Centre forecasts that the value of the average British home, currently £176,000, will increase to an all-time high of £200,700 in 2015 with hikes of 2.4% in 2012, 3.4% in 2013, 3.6% in 2014 and 4% in 2015.
It says the ongoing shortage of housing, a gradual increase in the availability of mortgage finance and a prolonged period of loose monetary policy will cause the upsurge in house prices.
House building will remain depressed for the next four years and this, combined with population growth, will result in an increasing shortage of accommodation.
The CEBR says this is likely to elevate house prices, making home ownership less affordable and placing further pressure on the rental market. Furthermore, the base rate is unlikely to rise above 2% before 2015.
Shehan Mohamed, economist at CEBR, said: “We forecast an average of 110,000 new homes to be built every year over the medium term.
“This is significantly lower than the 225,000 homes that need to be created every year to keep pace with current housing needs, population growth and the trend towards reduced household sizes.”
Douglas McWilliams, chief executive of CEBR, said: “We do not expect a house price boom, but the housing shortage is likely to push prices gently upwards.
“By 2015, our updated forecast price for the average house is £200,700. The previous peak level was £191,200 in 2007.”
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