CEBR forecast 30% rise in property prices

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by Kay Murchie

Last week, the latest Nationwide survey found that UK house prices had fallen for the ninth consecutive month.

Some analysts have been predicting further falls of at least 7% this year while others have been predicting much higher falls.

However, according to the Centre for Economics and Business Research (CEBR), property prices will start to rise during the middle of 2009 and will rocket 30% over the following three years.

The economics consultancy predicts that by the end of 2012, average house prices will be up by more than £50,000 to £226,000.

The news will no doubt be a relief for the millions on the verge of negative equity. Last week, credit ratings agency Standard & Poor (S&P) said if property prices continue to fall at their current pace, around 1.7 million people could be pushed into negative equity in the next 12 months.

The housing slowdown has been gathering pace over recent months, housebuilding has almost ground to a halt and construction companies have announced thousands of redundancies.

Last week, the Bank of England reported that the number of new mortgages approved for house purchases has fallen by 68.4% in the year to June - the lowest level since records began in 1993.

The Bank said mortgage approvals fell from 41,000 in May to 36,000 in June. The number of mortgages approved has now fallen for 14 consecutive months.

However, the demand for new housing continues from groups such as divorcees and immigrants.

The prediction echoes that from the National Housing Federation (NHF) who last week suggested that average house prices in England are set to rise by 25% by 2013.

The NHF said prices will continue to fall by 4.4% this year, 2.1% next year and then recovering in 2010 onwards.

The reason for the optimism according to the NHF is the demand for homes as people are living longer, delaying getting married and getting divorced which is all adding to the demand.