NIESR provides gloomy outlook for house prices

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by Kay Murchie

The National Institute of Economic and Social Research (NIESR) believes the recent rises in house prices is probably the result of a lack of available homes.

As a result, the think tank expects the house price slump to persist for another two years.

The news comes despite some positive reports within the housing market after the Council of Mortgage Lenders (CML) announced earlier this week a surge in mortgage lending for the month of June.

Furthermore, HM Revenue & Customs (HMRC) has revealed a rise in the number of homes sold in June in the UK.

According to HMRC, 75,000 homes worth at least £40,000 or more were sold in June - a rise of 15% when compared with May.

The HMRC said this was the highest level of activity for 12 months but the figures are still well below the level of transactions seen during the housing market boom.

Meanwhile, returning to the NIESR’s report, it commented: “The temporary rise in prices is probably the result of limited supply.”

“There has been talk of stabilisation and some recovery in the housing market, but we don’t think this is the case. We only see growth in the housing market returning in 2012, ” the Institute added.

With regard to house prices, the latest survey from the Nationwide building society said for the third time in the last four months, UK house prices have risen.

However, many reports highlight that the lack of mortgage finance continues to hinder a recovery in the housing market.