London house prices to rise by 43% in five years

House prices in London are set to jump to an average of over £500,000 by 2018, according to The Centre for Economics and Business Research (CEBR).

Prices across the country will rise 2.9% to an average of £225,000 this year, followed by a 3.9% jump in 2014. By 2018, the average UK house price will be up 23.7% to a record figure of £278,000, while in London, average prices are forecast to hit a staggering £566,000 – a leap of 43.5%.

The figures will set alarm bells ringing over the long-term effects of the government’s Help to Buy scheme, which has helped bolster mortgage approval rates to their highest level for five-and-a-half years.

According to the Daily Telegraph, CEBR economist Daniel Solomon said that the government scheme had provided the market with a “shot in the arm”, but that fears of a house pricing bubble were “premature”. A housing shortage was a bigger problem, he added.

Last week Nationwide said that annual price inflation was running at 5% with London prices rising by 10%, an increase of more than £30,000. The building society added that in Hackney, Westminster and Islington, houses prices had more than doubled since 2003.