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Average house prices are set to rise to over £300,000, says new survey

  • 08/05/2002
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Future affordability issues for first-time buyers are in the spotlight again with forecasts that ave...

Future affordability issues for first-time buyers are in the spotlight again with forecasts that average UK house prices are set to rise above £300,000 by 2020, and to £4.9m by 2052, according to separate studies conducted by the Centre for Economics and Business Research (CEBR) and Yorkshire Bank.

CEBR research predicts a 197% increase on today’s house prices over the next two decades. A similar study commissioned by Yorkshire Bank suggests house prices will increase 50-fold in the next 50 years.

The CEBR said house prices will grow by 6.55% by 2010, bringing the average price to over £165,000 and then by a further 6.14% between 2010 and 2020.

Douglas McWilliams, chief executive of the CEBR and the report’s author, said the predicted increases over the next 20 years could lead to a chronic housing shortage.

‘For those on low incomes and those who have not yet purchased their first home this will make the step onto the property ladder even more difficult. It will lead to an increase in the average age of the first-time buyer,’ he said.

Yorkshire Bank has calculated a monthly mortgage payment of £400 in 2002 could soar to nearly £20,000 over the next 50 years.

Paul Fegan, chief operating officer at Yorkshire Bank, said: ‘UK house prices have increased 50-fold in as many years, so it is not out of the question they could do the same again. While the rate of house price growth does fluctuate, the fact remains the cost of property continues to rise.’

London is set to remain the highest-priced region in the UK, with the CEBR predicting average prices to stand at almost £600,000 by 2020. But prices in the East of England are set to increase the most ‘ by 6.99% ‘ boosting an average price above £368,000 over the next 20 years. Prices in the North East will remain cheapest, with the average price set to stand at just £123,651 after the same period.

Despite the CEBR’s warning that average house prices could be forced to grow faster than average earnings, Yorkshire Bank remains confident that affordability problems are not yet set in stone for future buyers.

‘The proportion of owner-occupied homes compared to rented properties has more than doubled over the last five decades, from 29% to 68%, suggesting we are becoming a nation of homeowners. With so many mortgages available to suit customers’ needs, future generations might have little trouble affording a £5m home,’ said Fegan.


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