House prices to soar 20% in next three years
Filed under: Mortgages, Property
House prices could soar 20% in the next three years, says the Centre for Economics and Business Research. It now predicts that prices will rise more than 6% this year. An improvement in the availability of mortgages and steadily rising loan approvals prompted the think tank to revise its forecasts.Just a month ago many experts were forecasting flat house prices this year. But now the Nationwide is predicting a 10% increase, which would be the biggest jump since 2007.
The CEBR reckons the average price of a home could rise from £167,000 to £178,000 by the end of the year, a 6.5% rise. And prices could return to their previous 2007 peak of £198,000 sometime in 2012.
The reasons behind this newfound optimism are a shortage of new properties on the market, a pick-up in mortgage lending, low interest rates and unemployment not rising as much as feared during the recession. The CEBR believes interest rates will stay on hold at 0.5% until at least the middle of next year.
Key is that banks and building societies are approving more mortgages. The think tank predicts that around 72,000 mortgages a month will be approved by the end of the year, compared with 60,000 now, rising to 90,000 a month by 2013 - still below pre-credit crunch levels, but enough to sustain house price growth.
However, other surveys show that there is a growing a north-south divide, with price rises driven by London and the south while the rest of the country is more or less stagnating.
Soaring deposits remain a problem for first-time buyers, as many banks require a first-time buyer to have saved at least 25% of the purchase price of a home. As a result, the average age of a first-time buyer has risen to 38! The situation is worst in London, where the average deposit has increased by 132% over the last couple of years to £57,213, and the average flat price is £228,628, according to Hometrack. But there are some better mortgage offers for first-timers out there now, as Walletpop reported last week.
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