Independent economists Oxford Economics forecast house prices would increase 22% over the next five years – fuelled by a chronic under supply of new housing.
According to the research, house prices will rise 7.5% this year, but will then fall again in 2011 by 3%, before recording a modest increase of 0.9% in 2012.
House prices will then increase by:
4% in 2013
5.4% in 2014, and
4.9% in 2015 – 22% higher than they were in 2009
Homeowners who bought during the peak of the market in 2007 are likely to experience continued negative equity until 2014 – based on average house price figures for England.
The Federation, which represents England’s housing associations, said it feared an entire generation of people would be locked out of the housing market as a result of high house prices. And the chronic shortage of social housing will leave those shut out of the home ownership market with little realistic chance of getting a social home.
The new report – Home Truths 2010 – shows the country is in the midst of the worst housing crisis for generations.
While demand is growing, supply of new housing is falling. In 2009/10 just 87,360 new homes were started in England, producing only enough homes for a third of the new households forming each year.
Despite the recent recession, house prices nationally are still 19% higher than five years ago and 120% higher than 10 years ago.
More than 1.76m households, or the equivalent of 4.5 million people, were on social housing waiting lists in 2009, a 23% increase in the last five years.
According to Oxford Economics, the average house price in the English regions in 2015 will be:
North East – £151,700 (compared to £148,100 in 2007)
North West – £175,200 (£162,000 in 2007)
Yorkshire & Humberside – £171,000 (£163,600 in 2007)
East Midlands – £76,300 (£172,500 in 2007)
West Midlands – £185,700 (£178,400 in 2007)
East of England – £257,000 (£231,100 in 2007)
London – £375,900 (£329,200 in 2007)
South West – £245,600 (£224,500 in 2007).
Federation chief executive David Orr said: ‘For those who bought at the peak of the housing boom, there’s a strong possibility that they will have to wait another four years before their home is actually worth what they paid for it.
‘But house prices will inevitably increase in the long term because of huge under-supply of housing. Even though price rises look sluggish for the next few years, affordability is not improving for many low-to-middle income households – as banks continue to restrict their mortgage lending and house prices remain historically expensive in relation to salaries.
‘There’s a very real risk that an entire generation will be locked out of the housing market for the foreseeable future and people will increasingly look to buy or rent an affordable home instead.
‘But the Government’s decision to scrap regional house building targets, withdraw funding for new affordable housing schemes and to cut budgets, means the future looks bleaker than ever for millions of people currently stuck on waiting lists.
‘Proposed caps on housing benefit payments could also put nearly a million people on low incomes at risk of losing their home – and further deepen the nation’s dire housing crisis.
‘We would urge the Government to closely consider the huge human, social and economic cost of failing to invest in affordable housing.’
Mr Orr added: ‘We understand the need to reduce the deficit and housing associations are continually thinking about how to build homes while being even more effective and innovative – and maximising the value they deliver for the public money invested.’
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