Can house prices rise 20% by 2018?

The outlook for the UK economy might be bleak, but new house price forecasts suggest it’s not all bad news.

Figures from the Centre for Economics and Business Research suggest the average UK house price will be £267,000 by 2018, up from £222,000 today.

This house price growth of 20% is set to be supported by general wage increases and population growth.

The new Help to Buy scheme announced in the Budget last month is also expected to help; boosting house prices before raising housing supply.

Assuming this forecast becomes a reality, it would result in the average homeowner becoming wealthier to the tune of £25 a day or £750 a month over the next five years.

Rising house prices are usually good news for the economy.

Growing property values mean greater consumer confidence, with the feeling of wealth leading to increased spending on the High Street and a general boost for the economy.

Maybe this was George Osborne’s master plan for the British economy when he announced a raft of measures to stimulate the housing market in his Budget last month.

With the Bank of England programme of quantitative easing doing little to keep the UK economy afloat, and the more recent Funding for Lending Scheme resulting in little additional lending for businesses or individuals, Osborne needed something that would feed directly into the real economy.

Whether any house price increases resulting from these measures, and more general factors, will be sustainable is another matter.

Little could be worse for the British economy over the next decade than an unsustainable housing market boom.

Hopefully a buoyant housing market can on this occasion take place with solid foundations.