Report: UK Home Prices Set to Rise 7 Percent in 2014

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Rising consumer confidence and government support programs will push U.K. home prices up 7 percent in 2014, consultancy Knight Frank predicts.

"For first time in five years we can be broadly positive about the U.K. housing market," the firm reports. "Price growth is encouraging transactions, contributing to labor mobility, and first time buyers are able to access the market in a way they couldn't even 12 months ago."

The group's positive outlook extends beyond central London, which has been the primary driver of prices increases in recent years. But price increases in London have started to slow, after a historic run-up, the firm recently reported.

The group predicts a 24 percent cumulative growth for UK home prices by 2018.

"We have been persuaded that growth in 2014 and 2015 will be substantially higher than inflation," Knight Frank reports. "However we have maintained our view that over the long term, while nominal and real price growth may remain positive, house prices are likely to rise more slowly than earnings for at least a few years after 2016."

Knight Frank had predicted a 2 percent decline in prices for 2013, but the Help to Buy program and a strengthening economy spurred prices higher by more than 3 percent, according to early estimates.

Communities closer to London will see higher growth, but price increases can be expected around the country. Prices in the North East and North West will bounce back by 6.7 percent and 7 percent respectively in 2014, while the East Midlands will see price rises of 7.3 percent, the consultancy said.

But the group warns that the market is still facing obstacles. Home price growth has only recently started to outpace inflation, the firm notes.

"Rising prices in the short term will limit longer term growth," Knight Frank says. "The fact remains that pricing in the UK is high in historic terms, and while the government can encourage activity over the next two to three years, it can not change the fundamentals surrounding market affordability, especially as the 'special factors' of low interest rates and government interventions start to unwind."