London house price average to reach £500,000 by 2020 according to CEBR

The average price of a home in London will rise to £500,000 by the end of this decade according to economic think tank, the Centre for Economics and Business Research .

The CEBR predict that the average house price in London will reach £383,000 by the end of this year, but expect growth to pick up significantly faster over the next seven years.

Fuelled by strong economic growth in the capital, house prices in London are set to rise by over 30% from 2013 to 2020. The city’s expansion will be driven by strong links to emerging markets, high levels of immigration and sturdy service sector growth. London will also benefit from its relatively low reliance on the public sector, which is currently being subjected to a series of spending cutbacks.

The CEBR expect that an influx of foreign workers over the next seven years will bring the capital a diverse new range of skillsets, languages and international commercial links, which it believes will spur economic and house price growth in the city.

Prospects for the rest of Britain are less optimistic. In Northern Ireland house prices are forecast to rise by just 6.0% between 2013 and 2018, and in the North East of England house prices are predicted to rise by a slender 2.3% over the same period.

Northern Irish house price growth is unlikely to accelerate due to the province’s close economic ties with the Republic of Ireland, where residential property prices have plummeted significantly since the start of the financial crisis.

House price growth in the North of England is expected to be restricted by the region’s bleak economic growth outlook.

House sales rise

Hamptons properties reported a 6% increase in properties for sale at the beginning of January, and the latest RICS report shows that property sales rose by 15% during January, marking the fourth consecutive month of growth.

It is thought that the government’s new Funding for Lending Scheme is having a positive effect on the housing market. The FLS aims to improve the UK economy by offering banks and building societies cheap loans, as long as they lend it on to businesses and individuals.

According to The Guardian mortgage rates have fallen significantly since the scheme has come into effect.

‘The average two-year fixed mortgage with a 90% loan to value ration fell from 5.33% in December 2012 to 4.73% in January 2013 – the biggest one month drop since 1996.’

With interest rates falling, making it easier for individuals to be approved mortgages, the government’s Funding for Lending Scheme appears to be breathing life into the UK housing market.

The question remains as to who will be able to afford a property in London – though it seems to be nothing but good news for those who already do.