House prices on course to pass pre-crisis peak levels

A recovery in the UK property market is gathering pace, with house prices on track to surpass their pre-financial crisis peak for the first time and signs of improvement in the mortgage market, economists have disclosed.

The number of houses up for sale is also the highest since the start of the financial crisis, while the strength of the property pick-up should see house prices back to their 2008 levels by next year, say forecasters.

It comes amid rising optimistic among house builders, with Barratt and Bovis recently reporting growth and the Royal Institution of Chartered Surveyors saying that the depressed housing market could soon be over the worst.

Average prices this year are expected to edge up to £219,000, marking a 0.8pc increase compared with 2012, according to the Centre for Economics and Business Research (CEBR). By 2014, a typical house in the UK will cost £223,000, a figure which is 0.7pc higher than the 2007 peak.

[Related link: Will house prices soar or crash in 2013]

Daniel Solomon, CEBR economist, said: "Next year UK property prices will hit a significant milestone, passing their pre-crisis peak for the first time."

The slow recovery will be welcome news to homeowners who bought around the peak of the market and have found themselves stuck with little or no equity in their home. The forecaster said that house price growth will accelerate in the coming years as the economy gradually picks up.

But regional differences are widening with the central London market, a magnet for foreign buyers, continuing to lead the way and influence the national average. The overseas invasion has helped raise the average London price to £480,890, an increase of almost 10pc on a year ago says Rightmove, the property search website. The market in Wales is continuing to weaken with the average asking prices down 2.5pc on a year ago to £153,649.

The CEBR predicts that in five years' time a typical home will cost £261,000, representing an increase of almost a fifth (19.1pc) compared with this year.

Meanwhile, according to Rightmove, the number of new houses coming on the market is up 22pc to more than 11,000 a week.

Miles Shipside, director of Rightmove, detects a fundamental change in the market with a growing number of buyers looking to move for discretionary reasons. He said: "After five years of putting their lives on hold with their spare space shrinking around them, it looks like some of the pent-up demand to move is breaking out."

Moves to ease the mortgage bottleneck are also providing a stimulus. The Government scheme to make it easier for lenders to access cheap finance is being reflected in Council of Mortgage Lenders figures and cuts in borrowing rates.

Some home owners are also seeing an improvement in their financial position according to a report from Markit, the financial information business. Almost 30pc believe they will be worse off this year but the 25pc anticipating an improvement is the highest number for four months.

The Ernst & Young Item Club is also anticipating a steady improvement in home prices over the next two years with a modest 0.2pc increase this year followed by 2.1pc next year and 5pc in 2015 helped by economic recovery and the jobs outlook.

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