Property experts expect house prices in Britain to increase by an average 3% in 2015, while rents are likely to rise by 2%.
The forecast comes from the estate agent and surveyor trade body the Royal Institution of Chartered Surveyors (RICS).
The boost to house prices comes from Chancellor George Osborne’s recent overhaul of the stamp duty regime to reduce the price of stepping on to the property ladder and a continuing high demand for a low supply of homes.
House prices in London will see a house price standstill with RICS predicting zero growth with modest 2% rises in Wales and the South-West.
RICS argues rents will also enjoy a modest increase as demand continues to exceed the supply of buy to let properties.
Not enough new homes
Estate agents and surveyors suggest the highest increases will be in the South West and North East.
More than 1.25 million homes are expected to change hands during the year – slightly up on the 2012 total of 1.22 million. The figure still significantly lags the 2006 peak of 1.67 million.
Despite government initiatives, the building of new homes is still disappointingly slow, says RICS, revealing around 155,000 should be built next year, which is well below the number of homes needed.
The government has calculated at least 240,000 homes need building every year to keep up with demand.
Repossessions are running at an eight-year low of 23,000, and the figure is expected to dip below 20,000 over the next year.
Despite the improving economy, RICS argues the underlying issues affecting the housing market will not go away quickly.
The market is facing problems with supply because not enough new homes are being built and affordability because mortgage restrictions are limiting the number of buyers who can win mortgage approval, said the report.
“This year was a significant year for the property market as the recovery has led to prices improving,” said Jeremy Blackburn, RICS Head of UK Policy.
“The government understands too few houses are being built, but we have had a lack of stability from the government with four housing ministers in the past five years. What the market needs is a government who doesn’t treat housing like a political football.
“Changing the stamp duty rules was a welcome but well overdue development that will be a fillip for the market in the short term, but now the government has to look at reviewing council tax.”