UK house prices are forecast to rise by another 10% in 2014 due to continued lack of property supply.
Price growth will spread from London to the rest of the country as the recovery goes nationwide, according to a new report from buy-to-let specialist Assetz.
But there is no solution on the horizon for the famine of new property instructions, with small and medium-sized builders "strangled" by lack of funding.
Stuart Law, chief executive of the Assetz, welcomed the positive outlook for the UK housing market. "This year the headlines have centred on price growth in London but next year we will see the rest of the country fighting back.
"Well-established locations in city centres and suburbs accounting for around 85% of residential property, where employment is high, will see strong price growth.
"However, in the 15% of areas where employment is low and economic conditions are poor, prices will continue to be suppressed."
He said there is no real answer to the shortage of supply in new homes. "While large housebuilders’ balance sheets have recovered very nicely their output has not been able to make a significant dent in the supply deficit.
"Small and medium-sized housebuilders continue to be strangled by a lack of funding. While some intend to increase the number of homes they are building next year by up to 200% this is just skirting around the edges and will not solve the housing deficit crisis.
"Around 350,000 new homes are needed per year to have any impact on property price growth but I doubt this will even reach 150,000 housing starts next year."
Law said rental yields for buy-to-let landlords should have fallen as property price growth exceeds rental growth.
“At the start of this year average yields in city centres for investors were between 8% and 8.5%, but now they are more around 6.5% and 7.5%.
"Next year we will see city centre yields at around 7.5%. Without the necessary injection of supply to temper property price rises, yields will be suppressed.
“Any government intervention that will make things easier for small and medium-sized builders is welcome.
"Encouraging institutional lending or fully relaxing current strict planning laws, and removing the need for lengthy appeals planning processes, would make a real difference to small builders.”
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