UK home price 'up £1,000 a month'

Prices will continue to head upwards the CEBR says.

Britain's housing boom will continue in 2007, with average prices rising by £1,000 a month, a report by a leading think-tank suggests.

The Centre for Economics and Business Research (CEBR) said it saw no evidence that increased interest rates would hit the cost of homes.

House prices will increase by 7.6%, the CEBR told The Observer newspaper.

However, slower growth is predicted in 2008 and 2009 before acceleration again in 2010.

'Shortages'

There have been warnings that a string of UK interest rate rises - including a shock January hike from 5% to 5.25% - would cool the market.

The CEBR does not share the fears from some experts that there will be a correction in house prices of between 15% and 20%.

"The underlying fundamentals of the housing market continue to support prices," John Ward, one of the report's authors, said.

"Even though interest rates may act as a dampener on the market people are spending considerably less of their incomes on mortgages than in the early 1990s.

"Furthermore, in many parts of the country, shortages remain acute."

The average UK house price was £187,000 and was likely to be £225,000 by 2010, the CEBR said.

Recent research showed homeowners in Northern Ireland were 2006's biggest property winners, with towns in the region seeing the largest house price hikes across the UK.

The survey from Halifax Estate Agents also found London and the south east of England registered strong price growth, buoyed by high City bonuses and a shortage of housing supply.