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Home prices 'to rise by 2% in 2011'

House prices will edge ahead by just 2% next year but property values will be 16% higher than they are today by the end of 2014, an economics consultancy has predicted..

The Centre for Economics and Business Research (cebr) expects house prices to rise by only 2.2% in 2011 as unemployment increases on the back of public sector cuts and household incomes remain under pressure.

But it expects low interest rates, further quantitative easing from the Bank of England and the ongoing housing shortage in the UK to offer some support to the market, with house prices likely to be 16% above their current level by the end of 2014.

The forecast is considerably more optimist than ones from many other economists, with Howard Archer of IHS Global Insight expecting house prices to fall by 10% during the coming year, while Capital Economics still expect a 20% slide in property values between now and the end of 2012.

Douglas McWilliams, chief executive of cebr, said: "Quantitative easing is a very powerful medicine and is likely to have a strong impact on the housing market eventually.

"House prices may not move much during 2011 but they are likely to rise significantly in the following three years on the back of quantitative easing to offset the impact of the fiscal retrenchment."

The group expects house prices to end this year just under 7% higher than they started it, at an average of £179,411.

Sluggish growth in 2011 will be followed by stronger increases of 4% in 2012, 5.4% in 2013 and 4% in 2014, to leave the average property costing £208,816.

Cebr said a decision by the Bank of England to embark on a fresh round of quantitative easing would reduce long-term interest rates and help to boost mortgage lending.

As a result, it expects the number of mortgages advanced each month to rise from its current level of just 47,000 to around 77,000 by 2014, although this figure is still below the peak of 119,000 reached in 2006.

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