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| Link to: Centre for Economics and Business Research |
"Despite concern in some quarters, the housing market is being driven largely by fundamentals – demographics and the economy – not speculation. Talk of housing bubble is premature. A slowly recovering economy, the domestic population’s need for homes, slow supply growth and improving credit availability are all supporting house prices.
"Even London’s prodigious house price growth, expected to be 6.9% this year, is being driven by the fundamental fact that people want to live in the capital with its employment and cultural opportunities.
"Policy drivers will continue to provide a boost. As of October 2013, three months earlier than initially planned, potential homebuyers will be able to apply for assistance from the Help to Buy scheme, which will provide up to £12 billion of mortgage guarantees. We expect this will lift house price growth by increasing the availability of mortgage financing.
"The Bank of England’s Governor has said base rates will be kept on hold until unemployment falls below 7.0%, suggesting rates are unlikely to rise before 2016. This forward guidance should anchor mortgage costs and so support house prices."
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