Has a new housing boom started?

Recent reports of impressive house price increases in London have prompted Investment & Business News to ask whether a new housing cycle is in progress. Investment & Business News is debating whether a downturn has been skipped and if a new boom has started - with London leading the way.

The theory does away with the notion that a house price crash is imminent, with recent research from Oxford Economic Forecasting (OEF) seeming to confirm this possibility. According to OEF, average house prices in England could rise from £195,000 to nearly £290,000 by 2011. Demand outstripping supply will be the driving force behind house price inflation, states the forecasting body. However, Investment & Business News concedes that the currently low interest rates are partly responsible for pushing up house prices. Furthermore, low interest rates mean mortgages are quite cheap in the short term, resulting in the housing cycle being stretched over a longer period of time and distorting the true picture.