The outcome of the recently held London’s Annual Great Housing Market Debate is that property prices will rise steadily in-line with inflation over the next few years with no sign of a double dip in house prices this year.

The panellists at the debate believe that house prices will flat-line this year. However, concerns were expressed about a further boom/bust period beyond this as demand continues to outstrip supply and if mortgage availability improves.

Panellist John Heron, managing director of Paragon Mortgages, said: “The key feature behind the strength of house price rises recently has been the shortage of supply and the low build rates and when compared to demand, this is likely to carry on. We will continue to see owner occupiers sitting on their hands benefiting from low interest rates and pocketing the extra cash.”

The panel did not see lending returning to “normal conditions” in the short-term and furthermore could see no reason why lenders would be compelled to increase loan-to- values (LTVs) while banks are required to hold more capital and regulation means higher mortgages costs.

Panellist Martin Gahbauer, chief economist of Nationwide Building Society, said: “The short-term reality is that the funds are simply not there at the moment; essentially the UK banking industry and mortgage sector faces a funding gap of several hundred billion pounds. The industry’s big challenge over the next couple of years is to refinance the existing stock of lending. The funds that are available for new lending are barely enough to cover the demands for lower LTV lending at around 75-90%. So the incentive for lenders to move further up the risk curve to 90% is limited simply by the amount of funds available, particularly in light of the uncertainty about future regulatory and capital requirements.”

The consensus of the panel was that the rental market was set to grow from around 12% at present to 20% in ten years time. A vibrant rental sector was welcomed as good for the economy and the only alternative for many would be first-time buyers for whom finance was still largely unavailable. Net immigration to the UK, more demand for single occupier property and need for a more flexible workforce were also seen as key factors.

The debate finished on the controversial topic of Home Information Packs (HIPs), with an overwhelmingly vote to “adapt not scrap” the current pack. Just four people in the audience of more than 100 voted to scrap HIPs despite the pledge by both the Conservative and Liberal Democrats to do so if they take power in May.