CBI: Housing scramble will result in 8.2pc increase

With a lack of supply pushing prices up, the CBI called for a ‘renewed push’ on dealing with the urgent need for homes in its manifesto ahead of the 2015 general election.

Prices inflated by 3.6% in 2013, while in London they currently stand 25% above their 2008 peak.

For the rest of the UK not including the capital prices are still 2% below their pre-recession high.

John Cridland, CBI director-general, said: “We have to remain alert to the risks posed by unsustainable house price inflation, and the Financial Policy Committee is poised to act when necessary.

“Although London house prices have risen 25% above the 2008 peak, this has in part been fuelled by foreign cash buyers. Outside London, prices remain around 2% below peak figures with an even greater difference when you move outside the South East.”

Housing transactions are picking up despite being 29% below their 2006 pre-crisis peak, as with an increase in real wages and productivity consumer spending is expected to grow by 2.4% generally this year and next.

Cridland added: “Housing has come back under the spotlight as annual house price inflation figures have reached double digits on some measures.

“While housing transactions are still running almost 30% below their last peak in 2006, they are picking up steadily.”