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It has been forecast that house prices will rise by 40 per cent in the next five years, bringing the average cost of a home to £300,000 by 2012.

According to a report from the National Housing Federation (NHF), there will be a slight slowdown in the property market over the next two years, with inflation easing to around two per cent as interest rate rises exert their influence.

From 2009 onwards, however, inflation is expected to climb to ten per cent a year, leading to an average house price of £302,400 by 2012.

The NHF said that this will put increasing strain on social housing and described it as "vital" that the government stands by its pledge to deliver 70,000 new social homes per year.

David Orr, chief executive of the NHF, said: "Our projections show that it isn't going to get any easier to buy a house in this country. A growing number of people will find that their only hope of finding a decent affordable home is through a housing association.

"That's why it is absolutely vital that we are able to deliver 70,000 social homes a year."

Mr Orr said that, while soaring house prices may seem like good news for homeowners, they will only be able to take advantage if they sell up and move to a smaller property.

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Author:  Joanne McCabe

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