• Economic growth is expected to be stronger in the capital
  • There is evidence of a growing 'North-South' divide in the housing market outside London

By James Salmon

PUBLISHED: 20:34 EST, 10 February 2013 | UPDATED: 20:36 EST, 10 February 2013

The price of a typical London home will hit half a million pounds by the end of the decade, according to leading economists. 

The average house in the capital will cost 383,000 this year and then rise more than 30 per cent by 2020, the Centre for Economics and Business Research think-tank said. 

Experts last night said the figures would be welcomed by home owners in the capital but said it was 'grim news' for those already struggling to get a foot on the property ladder.

The price of a typical London home will hit half a million pounds by the end of the decade, according to leading economists

Price is up: The price of a typical London home will hit half a million pounds by the end of the decade, according to leading economists

The future is also looking bleak for property owners in the North East and the Midlands, with evidence of a growing 'North-South' divide in the housing market outside London.

Economic growth is expected to be stronger in the capital than the rest of the country, which will help fuel a rise in house prices of 24.8 per cent in the South East and 25.7 per cent in the East of England between 2013 and 2018. 

David Hollingworth said it was tough for first-time buyers already facing 'an uphill struggle with a constrained mortgage market'

'Grim news': David Hollingworth said it was tough for first-time buyers already facing 'an uphill struggle with a constrained mortgage market'

However, prices in the North East and Northern Ireland are forecast to grow by just 2.3 per cent and 6 per cent over the same period.

Official figures show the average cost of a home in the North East is just under 100,000, compared with 372,000 in London.

Daniel Solomon, CEBR economist and author of the report, said: 'Before the decade is out we predict the price of the average home in London will reach 500,000. House prices will be driven by London's comparatively rosy economic growth prospects, buoyed by IT, business and professional services.'

He added: 'Nevertheless, house price growth in London will remain notably slower than in the boom years before the financial crisis.'

The gulf in property wealth between families living in the South and those in the North was highlighted in a recent report by Halifax.

It found that properties in the South are currently worth a total of 2,000billion, compared with a total of 1,670billion in every other English region combined.

Responding to the latest predictions from the CEBR, David Hollingworth, from mortgage broker London & Country, said: 'Those who already have property in London and the South East will welcome these figures but they represent grim news for first-time buyers already facing an uphill struggle with a constrained mortgage market.'

75,000 FOR A GARAGE THAT BECAME A HOME

There was a time when 74,950 could buy you  a decent-sized house. How distant those days seem now!

For that is the asking price for this tiny one-bedroom home which used to be someone's garage.

Just 13ft wide, it looks like a glorified Wendy House yet boasts an open-plan kitchen, dining and living area, bathroom, upstairs double bedroom, and a courtyard garden at the back.

The house in Bridgwater, Somerset, has only just come on the market but has already attracted a fair amount of interest, according to estate agents.

Mark Franklin of Tamlyns said: 'We had someone come all the way down from Surrey to see it.

'It's very unusual. I've never dealt with anything quite like it before.

'There'll be somebody out there it would suit – perhaps a single person.'

Real estate agents said the converted garage, which boasts an open-plan kitchen, dining and living area, bathroom, upstairs double bedroom, and a courtyard garden would suit a singleton

Diminutive: Real estate agents said the converted garage, which boasts an open-plan kitchen, dining and living area, bathroom, upstairs double bedroom, and a courtyard garden would suit a singleton

The comments below have not been moderated.

FML I'm a first time buyer in London.... Can barely afford a one bed flat at £200k :((((((

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.....not good for those who thought they would get one for 6 corn flake tops then ???

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It already is 500k in the parts where you feel safe to live! It basically means Londons commuter belt is going to expand exponentially to accommodate masses of cheap labour commuting for the cheap service sector jobs - expect to see more houses converted to flats.

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No first time buyers kills the market stone dead. And those that are taking advantage on low interest rates will be stung once these rates raise as they surely must at some point in the none too distant future. All in all, not a good time to buy property.

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- Lauren, UK, 11/2/2013 16:22....................Well said i agree with every word.

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James, Ascot, 11/2/2013 16:20.Some one has given me a red arow for my previous post.It's like this if you don't understand how a market works and you don't like being told how a market works more fool you.Many DM readers are dim ,as the standard of their posts demonstrates Those who don't understand how to handle a market like the property market will continue to sit in less than optimum accommodation whinging and complaining and red arrowing those who get on with market reality . The government ought to do something somebody ought to do something.The market is behaving like a market and we don't like it.. What you like doesn't matter. No one can control the property market or any other large market for long. Your MPs wont tell you that they like to appear in control. They are not in control. A large population on a small island means property prices will always be under pressure any falls are usually short lived.If the market collapses so has the economy be careful what you wish for.

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Three double bedroom townhouse with en suite to master, garage and garden. 8 years old. £171,000, in Bedford. Why would I want to live in London?

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ian, Birmingham - Yes, lets put all the people who have just lost their jobs at HMV, Blockbuster, Jessops and comet in the workhouse. How dare they be unemployed, mooching off...well, the taxes THEY PAID IN. What an absolute idiot you are. Most people don't want to be unemployed, it is soul destroying then you have people like you and the idiots that agree with you and you make it ten times worse. I'd say you should be in the workhouse but you'd probably be too stupid to do any work. How do you hold down a job with an attitude like that anyway?

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The market will decide the price. People can only buy what they can afford .If London houses become unaffordable the price will move until they are affordable.If enough people can afford the price that price will be paid. If too many people can afford the price the price will rise.If too few people can afford the price will fall. The centre of any modern city is beyond the pocket of most purchasers.Starter homes are located in outer suburbs or other towns. Those people commute until they can move up the ladder- many never do.It's supply and demand and it will always win no matter what anybody does to try and influence the situation. A sharp fall in London prices is unlikely.The city is overcrowded and will remain overcrowded for the forseeable future.Many people buying in London come from wealthy economies including the Middle East and China. They don't find London prices are any kind of barrier they see them as good value. Sterling is cheap making UK property a bargain offshore.

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sell all councils houses to low paid workers, and put the unemployed in workhouses

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