House prices to fall this year but then climb back

House prices will continue falling for the remainder of 2011 but will then embark on a fresh four-year climb, an influential think-tank has predicted.

In a report published today, the Centre for Economics and Business Research (CEBR) forecasts a 1.4 per cent fall in UK house prices in 2011. But it expects prices to then rise by an annual rate of 4 per cent over the four years to the end of 2015.

House prices in Scotland have fallen back to their early 2007 levels, Lloyds TSB Scotland reported last week. But the CEBR's prediction of a four-year surge in prices, which comes in its latest Consumer and Housing Prospects report, is based on a continued shortage of housing. It also believes banks will ease their lending restrictions.

Douglas McWilliams, chief executive of the CEBR, said: "The main factor driving house prices up is the shortage of available housing which has already pushed up rents."

The group also warned that consumer spending is set to remain sluggish, with a 0.8 per cent fall this year and increasing by an average of just 2 per cent between 2012 and 2015.