House prices ‘to rise by 25% in five years’: Average home will cost nearly £280,000 while in London they will cost £566,000
- Young people will struggle to get on the property ladder with average at salary £26,500, experts warn following release of today’s figures
- Report’s author claims Help to Buy scheme is not fuelling housing bubble
- But banking analysts claim the new study shows it is ‘a near certainty’
The average price of a home in Britain will jump by a quarter in five years to reach a record figure of nearly £280,000, a report predicted today.
In London prices will rise even higher, from £395,000 today to £566,000 in 2018, according to the Centre for Economics and Business Research.
Experts warn a generation of young people are being frozen off the property ladder by the crippling cost of homeownership at a time when the average full-time salary is £26,500.
Many of them also claim that the Government’s controversial Help to Buy scheme will only exacerbate this trend.
Saving: Homeowners, however, are being offered the cheapest loan deals since records began
However, the report’s author Daniel Solomon, economist at the CEBR, insists the scheme is not fuelling a housing bubble.
Help to Buy enables people to buy a home for up to £600,000 with a deposit of only five per cent, with the Government providing a guarantee to the lender of up to 15 per cent of the loan.
It was meant to be launched in January, but will be introduced within days after the Prime Minister said he did not want to ‘stand back while people’s aspirations…are being trashed’.
The scheme has been widely attacked, with the Institute of Directors warning it is ‘mad’ and ‘very dangerous’.
Banking analyst, Sandy Chen from Cenkos, today also laid into the scheme as ‘not only daft, but dangerous’, adding it is a ‘near-certainty’ that house prices will be pushed up.
Over the next five years, the CEBR report predicted that house prices will jump from a national average of £225,000 this year to £278,000.
As well as the capital, the regions will also benefit, with a predicted rise in the East of 27 per cent to an average of £311,000 and a jump of £20,000 in the North East to an average price of £160,000.
Mr Solomon insisted fears of a housing bubble are ‘premature’ despite the wide-ranging criticism of Help to Buy.
He said: ‘Government support and an improving economic climate will provide an invigorating shot in the arm for the housing market over the coming years.
‘This is not a case of houses being built on the sand.
‘The housing market recovery we are seeing rests on firm economic and demographic foundations – at least for now.
‘Talk of a house price bubble is premature.’
The number of loans handed out to buy a home, rather than just to remortgage an existing loan, is rocketing, the Bank of England said yesterday.
In August, 62,226 house purchase loans were handed out, the largest number since February 2008 and a 30 per cent increase on August last year.
David Cameron has rejected fears the Help to Buy scheme will fuel a housing bubble.
The Prime Minister said the market was ‘recovering from a very low base’ and first-time buyers needed help to get on the housing ladder.
‘As Prime Minister I am not going to stand by while people’s aspirations to get on the housing ladder are being trashed.’
The existing Help to Buy scheme was launched in April, offering prospective home owners the chance to buy a new-build home with a deposit of five per cent.
To help them, they are given a loan, which is interest-free for the first five years, worth 20 per cent of the property price.
However, the new scheme is open to old as well as new-build homes.
The Government will guarantee up to 15 per cent of the home loan as an insurance policy for the banks lending the cash.