House prices will have recovered by 2011, research from the National Housing Federation has predicted, despite fears of a market crash as the credit crisis continues to hit mortgage lending.
According to the report, a number of factors mean that the housing market will be forced to make a speedy recovery. In fact, it predicts that house prices will see a rise of 25 per cent by 2013.
The independent research by Oxford Economics for the National Housing Federation
has forecast that while house prices will continue to fall modestly in 2009, they will begin to recover by 2010.
According to the statistics, by 2013 the average house price will stand at £222,600 – higher than the 2007 average. The main reason given for the future price hikes is the shortage of available housing, the report said.
Chief executive of the National Housing Federation, David Orr, said: "Our report shows that despite concerns about the current housing market downturn, house prices will increase substantially over the mid to long term.
"Demand for housing is going up, while the supply of new homes is going down. This means that as soon as the economic outlook improves, house prices will resume their previous upward trajectory."
The report also comments on how buyers are struggling despite the house price drops. Mr Orr added: "It's clear that even with house prices falling, affordability hasn't improved one iota. In recent months, we have seen mortgage
arrears increase, the number of repossessions grow and new mortgages difficult to acquire."
The number of new homes completed is expected to drop this year to 120,000 from 167,577 last year as the credit crunch bites. Consequently there are more people registered as being in housing need, with 1.5million people living in officially overcrowded homes.
In response to the news that house prices will soon recover, Mr Orr believes the Government should be doing more: "Ministers need to support housing associations in developing mortgage rescue schemes that prevent households from losing their homes." he said. "They should also support housing associations in buying up unsaleable private developer homes of a sufficient standard."
The news of an imminent house price recovery comes amid news of a 1.2 per cent drop in prices during July, reported by Hometrack, making a 4.4 per cent year on year fall.
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