cebr believes UK house prices will continue to grow 
(02/08/2010)
According to the latest Consumer and Housing prospects report published by the centre for economics and business research (cebr), house prices will grow by around four per cent during 2010, and will continue to grow over the forecasting period. They believe those forecasters projecting a double dip have got it wrong.
As far back as August 2008, when the economy was gearing up to turn in on itself, they suggested that although house prices were certain to suffer a steep contraction, the fundamental shortage of housing supply in the UK would provide a floor for prices and ultimately help drive the recovery: "Prices, already falling in most areas of the United Kingdom, will fall by fourteen per cent peak to trough from the end of 2007 to mid-2009. As the embattled construction sector reacts, housing completions will fall well below the government's targets. However, this is likely to be one of the key factors in prices recovering." (Extract from cebr Consumer and Housing Prospects press release, August 2008.
House prices actually fell by slightly more than they forecast at the time, but essentially they were right to assume that house prices would recover before the economy did. It is unfortunate, but hardly surprising, that many commentators are currently purporting that the minor correction in house prices over recent months is a prelude to an even steeper decline that will engulf the housing market over the coming years.
These doomsayers have completely ignored the housing market fundamentals. The small declines in house prices over recent months (the sum of which amounts to a decline of less than half of a percentage point compared with monthly falls in excess of 2% at the start of the 2008/9 crash) are the result of the market correcting for getting ahead of itself at the start of the year. The increase in supply which occurred soon after willing sellers saw prices begin to lift and the scrapping of HIPS, forced small changes in agents' expectations and set a more realistic, but nonetheless positive, path for house price growth over the coming years.
Through the emergency budget and the government outlining the upcoming austerity measures, buyers now have a clearer vision of the near future. And though not obstacle free, the forecasted prolonged period of very low interest rates will continue to stimulate demand for housing over the coming years. Strict planning regulations and a deep recession have contributed to a tight supply of new housing on our small island and are likely to persist, thus helping to drive house prices upwards.
The latest Consumer and Housing Prospects report from cebr shows that the rate of house price growth is expected to moderate in the latter part of 2010, but prices will still be around four per cent higher at the end of the year than at the start. During 2011, house price growth will soften as economic growth is dampened by public sector cutbacks, with associated increases in unemployment. Beyond this though, the current shortage of new housebuilding will mean that supply side problems persist, and they expect to see growth of five per cent in 2012 and a further four per cent in 2014.
Benjamin Williamson, one of the report's authors and economist at cebr said: "While we see a doubledip in house prices as being completely avoidable, this does not mean that we will see a return to dizzying house prices any time soon. Our forecasts show that house prices are unlikely to reach 2007 levels before 2013¡."
Douglas McWilliams, chief executive of cebr added: "People can no longer afford to let their homes do their saving for them. Whereas people of a certain generation used to be able to sit back and watch their retirement grow with the price of their house, members of Generation Y will have to work much harder for their savings in a world of low interest rates and sluggish house price growth."
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