Findings from cebr’s consumer and housing prospects report forecast that, while house price growth will slow in the latter half of 2010, there will still be a rise of 4% by the year end.
Rising unemployment on the back of public sector cutbacks will hit house price inflation in 2011 before it bounces back due to the shortage of new house building, resulting in a 5% rise in 2012 and a 4% rise in 2014.
Cebr said that property price ‘doomsayers’ are wrong to predict that a further sharp contraction of house prices is on the cards following modest falls in prices in recent months and that they are ignoring the fundamentals of the market.
It said that the recent small decline in house prices amounted to less than half a percent of the falls of more than 2% per month that were seen at the beginning of 2008/9 and it is merely a sign of the market correcting itself after prices grew too fast at the beginning of the year.
Cebr said that the recent increase in supply has forced more realistic, but positive, expectations of house price growth. The predicted long period of low interest rates will continue to stimulate demand for housing, while supply is likely to remain tight and help drive prices upwards.
Benjamin Williamson, one of the report’s authors and economist at cebr, says: “While we see a double-dip in house prices as being completely avoidable, this does not mean that we will see a return to dizzying house prices any time soon. Our forecasts show that house prices are unlikely to reach 2007 levels before 2013.”
Douglas McWilliams, chief executive of cebr, added: “People can no longer afford to let their homes do their saving for them. Whereas people of a certain generation used to be able to sit back and watch their retirement grow with the price of their house, members of Generation Y will have to work much harder for their savings in a world of low interest rates and sluggish house price growth.”