House prices are set to jump 4.7% this year - catching economists by surprise. In March they had predicted something closer to 1.5%, but buyers continue to flood the market and sellers are too thin on the ground - so now they expect prices to be forced up three times faster.
The new figures come from the Centre for Economics and Business Research, which blames a "Chronic lack of properties" for the jump. It added that housebuilding continues to fall short of the rate it needs in order to keep pace with population growth, so price rises will continue. In 2016 it expects growth at 3.4% and in 2017 it will be 4.4%.
This reflects the conclusion of Martin Ellis, housing economist for Halifax, who pointed out that: "Supply remains very tight with the stock of homes available for sale currently at record low levels. This shortage has been a key factor maintaining house price growth at a robust pace so far in 2015."
The CEBR and Halifax both added that low interest rates continued to support the market - along with higher wages and higher employment. The CEBR added: "Although the Bank of England is expected to hike interest rates from early next year, rates are expected to rise only very gradually, with the Bank Rate settling at a "new normal" of 2% – much lower than pre-crisis levels."
Both the CEBR and the ONS pointed out that prices are no longer being driven by London. The ONS highlighted the East and the South East as areas of particular growth - up 9.3% and 8.2% respectively.
The CEBR suggested that the slightly slower growth in London was due to pressures on buyers. It explained: "Although the Conservative victory at the general election means that a mansion tax is now off the table, the prime end of the London market has been dragged down by last December's stamp duty changes, which pushed up the cost of purchasing luxury property." It also said the strength of the pound was having an impact on overseas purchasers.
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