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House prices set to increase by 2016

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House prices are due to increase by 15% over the next five years it has been revealed.

Prices are set to increase by 1.6% by next year and then continue to increase until 2016.

Centre for Economics and Business Research have estimated through their studies that there will be a slow increase in prices.

An average three bedroom home will rise by more than £25,000 going from the current price of £176,184 to £202,068.

Over the next four years there will be less houses being built with the population of the UK growing and as the average household is getting bigger there will be a need for people to move which will increase house prices due to a shortage on homes.

It will be good news for homeowners who could see their homes going up in value but bad news for people who are currently trying to get on the property ladder.

The rise will make owning a home less affordable and will also put pressure on the rental market because of the expense of owning a home.

Douglas McWilliams, chief executive of the Centre for Economic and Business Research, said: “We do not expect a house price boom, but the housing shortage is likely to push prices gently upwards.

“Because we have revised down our forecast for economic growth from 2012 to 2015, we have also cut our forecast growth in house prices to 2015 from 15.8% to 14.0%.

“By 2015, our updated forecast price for the average house is £200,700. The previous peak level was £191,200 in 2007.”

The Centre of Economic and Business Research are expecting the levels of homeownership to decline as more first time buyers decide to rent.

It was recently revealed that a scheme could be put into place so that first time buyers will only need a 5% deposit to help them to own their first home.

With the news of house prices increasing first time buyers may only pay a 5% deposit but will have to pay more compared to if the housing market stayed the same.

In the current housing market if a house is at £110,000 5 per cent deposit would be £5500, when house prices increase it could be priced at £137,500 and the 5 per cent deposit would be £6875.

This means if housing prices go up deposits which were supposed to save money for first time buyers will end up being more.

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By Amanda Bainbridge