House prices 'to pass 2007 peak next year'

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LONDON (ShareCast) - UK house prices are set to surpass their 2007 pre-crisis peak next year, according to one economic forecaster.

The Centre for Economics and Business Research (CEBR) also predicts that a typical house in the UK will cost almost 20% more in five years time.

Its report claims average UK house prices will reach £223,000 in 2014, breaching the previous peak for the first time in seven years, pushed up by the economy's "fitful return to health".

Such a rise would leave house prices 0.7% higher than in 2007.

It also expects the Bank of England (BoE) to expand its quantitative easing (QE) programme from £375 billion today to £450bn by late 2013.

"This has the potential to increase mortgage lending and therefore raise property prices," the report said.

There are also preliminary signs that the Funding for Lending Scheme (FLS) could support mortgage approval values and make mortgages more affordable, it added.

The CEBR forecasts the average home price will reach £219,000 this year, 0.8% higher than in 2012.

The report echoes the positive view expressed in research released by Rightmove (LSE: RMV.L - news) on Monday.

New year sellers increased asking prices by just 0.2 per cent - around 440 pounds - in the first two weeks of January, according to the property website.

The site said it had seen the number of properties coming to market up 22% year-on-year, while its traffic was up by 27% over the first two weeks of January.

The weekly rate of new property listings was 11,153 but that was still down 37% on five years ago.

However, Rightmove said this was the highest level recorded at the beginning of a new year since 2008.

Its figures indicated there was increased confidence among sellers coming to market, with seven out of 10 sellers 'discretionary movers'.

This outnumbered forced sale drivers such as the 'three Ds' of death, debt and divorce.