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House prices to surge 20% by 2014

House prices will surge 20% to £227,800 in 2014, according to new research by the National Housing Federation out today.

This in spite of the fact that the research also forecasts that house prices will fall by 12.2% this year and a further 4.6% next year before stabilising in 2011 with a 1.1% rise. Thereafter, house prices are expected to increase by 7.5% in 2012; 8.4% in 2013; and 6.8% in 2014 when the average price will end up being £38,000 higher than the forecast average of £189,800 for 2009.

Independent firm Oxford Economics, who produced the figures for the NHF, also predict that house prices in England in 2013 will be 3% below their pre-credit crunch peak of 2007, but by 2014 they will be 3% higher.

On a regional basis, the firm expects an average priced property in London purchased in 2008 for £331,500 to drop to £268,600 in 2010, before rising to £354,900 by 2014. Meanwhile, it expects a home in the East Midlands to be worth less in 2014 at £165,300 than it was in 2007 at £172,500, with prices in the North West expected to decrease from their 2007 average of £162,000 to £159,300, those in Yorkshire & Humberside expected to increase from £163,600 to £175,600 and those in the South East expected to increase from £267,000 to £293,600.

NHF chief executive David Orr says: “Our new research shows that while house prices are falling in the short term, they will inevitably increase in the long term because of a fundamental under-supply of housing. “Even though house prices are falling, and are set to remain sluggish in some areas for the foreseeable future, affordability is not improving for many low-to-middle income households.

“For millions of people who want a home, getting a mortgage can be like winning the lottery. First time buyers and those wanting to buy shared ownership properties remain victims of a deep freeze in mortgage lending.”

He adds: “Until lending is freed up, young and lower income households without access to large deposits will be locked out of the market.”

In terms of supply, the research suggests that the supply of new housing is continuing to fall, with only around 60% of the new homes required being built each year. More than 250,000 households are expected to form each year until 2026, adding further to housing demand. Oxford Economics adds that five million people could be on housing waiting lists by 2010 in view of the fact that the 2008 waiting lists were 40% higher than in 2003 and comprised of 1.77 million households.

Orr says: “We welcome the Government’s recent promise of a national affordable house building drive, but if we are to avoid run-away house prices in the future when the economy picks up, ministers must ensure we build the right numbers of homes for social rent now, so that housing supply meets demand.

“They must also make sure that housing associations, who build the majority of affordable homes, get the right level of funding and income to enable them to deliver the number of homes we so desperately need.”

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