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Peak Property Values to "Return by 2014"

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United Kingdom  UK House Prices  Centre for Economics and Business Research  CEBR  Help to Buy  Daniel Solomon 

Peak Property Values to "Return by 2014"

By - Friday 05 April 2013

If you're looking for a property investment project you may need to act fast if you want to pick up a bargain, as it seems peak prices will be making a comeback before too long. Forecasts from the Centre for Economics and Business Research (CEBR) show that a typical house in the UK will cost on average GBP 227,000 by 2014 - surpassing the 2007 pre-crisis high for the first time by 2.3 per cent.

Price increases will begin this year, according to the CEBR, rising by 1.4 per cent from 2012 levels. This means that the average house will cost GBP 222,000, just under the pre-crisis peak. However, lacklustre wage growth, domestic banks' ongoing recapitalisation and the eurozone unrest is expected to keep growth relatively subdued in the near term. Nonetheless, as the economy begins to strengthen and wages rise, this will change.

The CEBR predicts that population growth, which is outstripping supply, will also lead to accelerated house prices over the medium term. A typical home in the UK will cost GBP 267,000 by 2018, rising by 4.6 per cent over the year. This is 20.4 per cent higher than values expected for this year.

However, these figures  do not factor in the effects of the government's Help to Buy scheme, as full details have yet to be announced. Nonetheless, the CEBR forecasts that in 2014 the policy could increase prices by up to 0.8 per cent, without having an appreciable impact on housing supply. This is likely to stimulate construction activity by 2015, leading to an additional 4,800 homes.

Daniel Solomon, CEBR economist and main author of the report, said: "By 2018, we expect the typical UK home will cost GBP 267,000 – over 20 per cent more than this year. Gradual wage and population increases will be the fundamental drivers of this medium-term trend. We expect the chancellor’s new Help to Buy scheme will push up house prices before it raises housing supply."

Will more building actually ease house prices? See what 30 years of statistics suggest here

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.

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