An average house will cost £460,000 in 2025, 2.4 times as much as it does today, according to a report by the centre for economics and business research (cebr).

The Consumer and Housing Prospects report said if the government met its target for building new homes, house price inflation would fall to just under 5.0 per cent between 2016 and 2025 – compared to a trend rate of 8.3 per cent between 1985 and 2006. However, even at that rate, house prices would be more than £460,000 by 2025. Also, a slowdown in prices will kick in by 2008, when house price inflation will be down to just over 4 per cent, falling to 3.2 per cent in 2009. However, even at these relatively modest levels of price growth, house prices will surpass £209,000 by the end of 2009.

Jaspreet Sehmi, economist at cebr, said: "The predicted slowdown in the housing market will provide some relief to the Bank of England policy makers who remain concerned over the medium-term inflation outlook. Our forecasts, which point to a further rise in interest rates to 6 per cent by the end of this year, suggest that the impact of the recent rate hikes is starting to take effect and that homeowners will have to adjust to significantly lower rates of price growth over the coming years."

John Ward, managing economist and one of the report’s authors, added: "Meeting its targets for house building will be crucial if the government is to help alleviate the current supply shortage in the housing market – and make a real contribution towards helping first-time buyers to get on to the property ladder in the longer term."

Source: Public Servant Daily