House prices tipped to surge again

A lack of new homes will lead to a big surge in house prices once the market recovers, it has been forecast.

The Centre for Economic and Business Research (CEBR) has suggested in a report that there may be an increase of as much as 30 per cent between 2009 and 2012 as the market bounces back.

It said the situation would be a consequence of the large fall in the numbers of new homes being built at present, due to the reduction in demand as the housebuying market slumps.

This will mean a shortfall of supply driving house price inflation higher than it would otherwise go.

A similar prediction was made last week by the National Housing Federation (NHF).

It said that while prices will carry on dropping this year and in 2009, from 2010 the market will see a reversal in its fortunes, with high inflation resulting from the lack of new dwellings.

The NHF tipped house prices in England to be 25 per cent higher at £275,000 on average in five years' time as a result.

With the prospect of a reduced choice of new homes in the short-term and then rising prices, some may decide to use the self build method to get their own new build home at an affordable cost.