A shortage in housing and an increased lending appetite will lead to a 16% rise in house prices by 2015.
The Centre for Economics and Business Research predicts house prices will decrease by 1.4% in 2011 but then increase by 16% between the latter half of 2011 and 2015.
But it also expects sluggish consumer spending, with a 0.8% decline in 2011 and growth at a relatively low average rate of 2% from 2012 to 2015.
It predicts the volume of food sales in 2011 will fall for the second year running, though by only 0.1% compared with 1.3% in 2010. Also, growth in clothing sales volume will drop to 3.3% this year, one of the slowest rates of growth in recent history.
Douglas McWilliams, chief executive of the Cebr, says there are signs that prices will stabilise over the second half of the year and it thinks the market is close to the bottom for the UK as a whole.
He says: “The main factor driving house prices up is the shortage of housing which has already pushed up rents. Housing completions fell to only 130,000 in 2010, well below the level required to keep pace with demographic change.
“International demand will also remain a factor, with the pound forecast to remain low and London likely to remain internationally attractive.”
He adds: “This is likely to boost house prices in the capital, which are forecast to rise about 2% a year faster than for the UK as a whole.”
But he says one of the factors that will drive house prices up will be the ability of banks to lend again on consumer-friendly terms as their own underlying financial position improves.
Data from the Land Registry’s house price index last week showed an increase of 0.8% in house prices in April compared with March, taking the average property price to £163,083.
But the increase marks an annual price decrease of 1.3%.
The highest annual price change was for London with a 5% increase. It also experienced the greatest monthly rise at 3%.
The North-East suffered the greatest annual price fall of -8.1%. It also had the most significant monthly price fall of -1.7%.