House prices will rise

CEBR believes that the present downturn will stop by the middle of next year and then average house prices will rise by up to £50,000 by 2012, hitting a record £226,000.

This report brings a ray of hope to those houseowners who bought recently and were slowly sliding into negative equity.  Predictions of 1.7m homeowners slipping into negative equity within the year have been mooted by some property experts.

CEBR says the lack of new homes in England is one of the factors that will kick start the rise in prices as demand for new housing continues to increase.  The other factors cited are mortgage lending increasing and interest rates being cut, from 5% to 4.25% next year.

This research by CEBR comes on the heels of a report released last week by the National Housing Federation in whcih it stated that the property market would recover in 2010 and 'rapidly increase' in 2011.  It also stated the lack of new housing as the main factor in the recovery.

David Orr, chief executive of the National Housing Federation, says: "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."