If the forecast is accurate the average house in the UK will stand at a record high of £261,000 by the end of the year.
The research group blamed the ‘chronic’ lack of properties being put up for sale as one of the reasons for driving up house prices.
London house prices are expected to lag behind overall annual growth in the UK, with prices in the capital predicted to rise by 3.7%. It said that while the Conservatives’ election win meant an end to fears of a mansion tax, the market was dragged down by the Stamp Duty changes brought in in December.
Under the new Stamp Duty rules someone buying a home worth more than £5m would pay £514,000 in Stamp Duty compared to £350,000 previously.
Stronger earnings growth and low interest rates are expected to support the upward pressure on house prices. The Bank of England’s warning that the Base Rate will rise at the start of next year is expected to be gradual with the rate settling at 2%.
The CEBR expects house prices to rise further in the next few years as house building fails to keep pace with demand. In 2016 a 3.4% rise is expected followed by an increase of 4.4% in 2017. Over the next five years, which spans the Tory’s time in power, the CEBR expects house prices to increase by 23% taking the average home to £321,000 by 2020.
Nina Skero, Cebr Economist and main author of the report, said: “With the possibility of higher taxation on prime property and intervention in the rental market less likely the Conservative Party’s victory in the general election will likely support stronger price growth in the second half of 2015. Prices will also see a boost from the lack of fresh properties coming on to the market.
Skero said the London average house price was being weighed down by the prime end of the market.
“A strong pound which makes London property less affordable for foreign buyers and December’s decision to increase Stamp Duty on properties valued above £1.1m are both deterring some prospective buyers,” she added.
