An economic think tank has forecast that the second phase of Help to Buy will lift house prices following the early launch of the scheme. It says that average house prices will hit a record high this year, growing 2.9% to £225,000. The prediction, from the Centre for Economics and Business Research, is however evidently based on the Office for National Statistics figure for house prices, and not on the much more modest Land Registry. The ONS is quoting £225,000 for the UK as a whole, against the Land Registry’s figure of £164,654 for England and Wales.
CEBR also believes that house prices will keep growing, and forecasts that next year they will average £234,000 – up 3.9% on this year. Forecasting the housing market recovery to extend beyond London and the south-east, it predicts that house prices in the east of England and in Scotland will rise by over 27% during the next five years. In London and the south-east, it expects house price rises of 43.5% and 27.7% between now and 2018.
However, the consultancy says talk of a house price bubble is unfounded, and the fundamentals of population growth and a shortage of housing supply support prices. Daniel Solomon, CEBR economist, said: “Government support and an improving economic climate will provide an invigorating shot in the arm for the housing market over the coming years. “This is not a case of houses being built on the sand. The housing market recovery we are seeing rests on firm economic and demographic foundations – at least for now. Talk of a house price bubble is premature.”