The average house price in England will rise by 25 per cent over the next five years to reach £274,700, despite fears of a housing market crash – according to a new report published by the National Housing Federation.

The report, which was researched by independent economists Oxford Economics – forecasts that house prices will fall in 2009 but will start to recover in 2010, and then rapidly increase from 2011.

The paper, entitled Home Truths 2008, says that house prices will increase by:
- 5.2 per cent in 2011
- 9.2 per cent in 2012, and
- 9.3 per cent in 2013 – with the typical price at the end of the period being well above the average in 2007 of £222,600.

However, in the short to mid term, the report predicts house prices will:
- Fall by 2.1 per cent in 2009, and
- Increase by 1.3 per cent in 2010.

The report also states that while demand is growing, supply of new housing is falling, with only 75 per cent of the new homes required being built each year. Additionally, it found that the least affordable place in 2007 was London, where a typical home was 14.2 times local salaries, compared to a national average of 11.2.

Other main points
- The credit crunch is preventing affordability from improving for first time buyers, even as some house prices fall
- Nearly 1.7 million households, (more than four million people) are on waiting lists for a social home – an increase of
- 100,000 households since last year, and
- At least 223,300 households are expected to form each year to 2026, and expected to add further to housing demand.

The report says that the average house price in the regions in 2013 will be:
- North East - £163,600
- North West - £195,600
- Yorkshire and Humberside - £188,800
- East Midlands - £206,500
- West Midlands - £197,600
- East - £294,600
- London - £408,200
- South East - £366,600, and
- South West - £283,900.

NHF Chief Executive 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.

“People are living longer, they’re delaying getting married and they’re more likely to get divorced – meaning we now have more households than ever.

“One in thirteen households is registered as being in housing need, with four million people now living in cramped or difficult conditions.”

He 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 become more difficult to acquire.”

Mr Orr believes the effects of the credit crunch could hit the delivery of affordable housing and that the Government needs to work with housing associations in a flexible and innovative way in order to ensure current housing targets are met.

He said: “Ministers need to support housing associations in developing mortgage rescue schemes that prevent households from losing their homes. They should also support housing associations in buying up unsaleable private developer homes of a sufficient standard.”